Buy Entertainment Network; target of Rs 630: ICICI Direct

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ICICI Direct’s research report on Entertainment Network

ENIL’s Q3FY19 performance was a mixed bag. While non-FCT business (~ 40% of topline), especially international concert drove topline beat, loss in the same impacted EBITDA & PAT • Revenues came in at Rs 200.9 crore (up 35.4% YoY), ahead of our estimate of Rs 188.2 crore. The topline was largely driven by higher proportion of non FCT business at ~40% vs. 30% earlier • EBITDA came in at Rs 40.4 crore (up 13.5% YoY), a tad lower than our expectation of Rs 42.3 crore while EBITDA margins came in at 20.1% vs. our expectation of 22.5%, largely owing to the international concerts business, which incurred losses • The reported PAT came in a tad lower at Rs 16.1 crore (vs. Rs 16.5 crore), on account of a miss on the EBITDA front.

Outlook

We were enthused by the core growth trajectory of ~20%, although the international concert losses were disappointing. We cut our earnings estimates factoring in weak H1FY20. However, considering the stock price correction of ~15% in the last three months, the valuations have turned attractive. Hence, we upgrade our rating to BUY with a revised DCF based target price of Rs 630, (implying ~26x FY21E P/E and ~10.5x FY21E EV/EBITDA).

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