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More clarity on digital foray needed…

About the stock: Entertainment Network India (ENIL), a subsidiary of Bennett, Coleman & Company Ltd (BCCL), operates Radio Mirchi which has 73 stations across 63 cities with more than 63 million listeners.

* Mirchi has been ranked No.1 in all Indian Readership Survey (IRS) surveys till date in terms of national reach

Q2FY22 Results: ENIL reported strong operating performance on a washout base.

* Revenues came in at | 72.7 crore, up 50.4% YoY on a depressed base but still 37% below pre-pandemic level. Radio ad volumes grew ~61% YoY while yields were down 5% YoY

* EBITDA was at | 9.7 crore vs. loss in the base quarter with margins at 13.4%, largely driven by the controlled costs

* The company reported a loss of | 10.8 crore vs. loss of | 29.4 crore in Q2FY21~| 4.6 crore with margins of 10.9% vs. loss in base quarter

What should investors do? ENIL’s share price has declined by ~76% over the past five years owing to a weak radio ad environment.

* We maintain HOLD on the stock as we expect realisations recovery to be gradual. Also, strategy on foray into digital platform is yet to be unveiled. We would revisit our stance post the same.

Target Price and Valuation: We value ENIL at | 185 i.e. 20x FY23E P/E.

Key triggers for future price performance:

* Recovery in ad realisations, which is still 37% below pre-Covid levels

* Return of government ads, which have dried up post 2019

* Foray into new digital platform business and the response of the same

Alternate Stock Idea: Besides ENIL, in our media coverage we like Inox.

* Play on multiplex earnings recovery post reopening

* BUY with a target price of | 495

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