Entertainment Network India Limited’s (ENIL’s) revenues dropped 12% y-o-y in radio, 19% in consolidated financials in the recently concluded quarter.
Impact of a challenging macro environment for advertising spends is visible; more pronounced for alternate forms of media, in our opinion.
Quarterly revenue trends validate our cautious outlook towards advertising spend trends for newer media. We opine traditional media (print, TV) may be early beneficiaries of an improved macro versus alternate platforms like radio, outdoor.
OoH to remain a drag over FY10 as the cost base rises with new investments while revenues are yet to gain traction; consolidated profits likely in FY11E.
Pick up in corporate advertising spend trends will be key variable to monitor given hopes of a quicker recovery in economic growth and corporate earnings.
Macro has nevertheless improved in our opinion; a 2H pick up in the advertising environment on the cards, in our opinion. Company management too echoed these expectations, on the earnings call yesterday.
Adjust earnings to account for the Q1FY10 results; maintain REDUCE rating with a price target of Rs205 (Rs215 earlier).
Trading upsides are nevertheless likely on speculation on increase in FII/FDI limits for radio, a long pending demand of the industry, given hopes of regulatory action.