ICICIDirect - Initiating coverage - Entertainment Network (Buy: Rs 315, Target: Rs 419)

Entertainment Network (ENTNET)

Price: Rs 315 Target: Rs 419 OUTPERFORMER

Entertainment Network (India) Ltd (ENIL) is well geared to capitalize on the
upturn in the radio industry through its pan-India expansion and
complimenting city-centric businesses. Considering its dominance in the
industry along with fillip from the other businesses, we expect the stock to
show significant upside in next 2-3 years.

Radio - biggest growth opportunity: Radio advertisement in India is
estimated to grow at a CAGR of 32% to Rs 1,200 crore by 2010 with the
revenue share policy being the key growth trigger. With more than 40 players
entering this market, we believe radio presents the biggest opportunity in
the media space.

Radio Mirchi - A clear winner: The company is the undisputed leader in the
10 cities it currently operates in. It has also acquired 22 licenses in key
markets. We rate Radio Mirchi as a clear winner among the players.

Part of India’s largest media conglomerate: ENIL is part of the Bennett
Coleman Group (Times Group), the largest media player in India having a
heritage over 150 years with presence across the value chain in the sector.
Along with strong management and execution capabilities the company has an
edge over the competitors with innovative themes and ideas to run the show
and continue to be market leaders.

OOH and 360° on steady growth path: On back of long term rights for
hoardings at airport, metro rail and bus shelters in Delhi, Mumbai and
Kolkata for OOH business along with big ticket events in the live
entertainment space we expect the subsidiary revenues to grow at a CAGR of
128.38% by FY09.

Valuations: There are no benchmarks for valuating ENIL as there are no other
players having the dominance and reach that it commands. However, globally
we can compare it to Clear Channel, Citadel, Austereo and Cox Radio, which
are trading at 10x-13x EV/EBIDTA. Growth in these companies is slowing down
and considering the growth which Indian market offers, we expect ENIL to
command a fair premium over the peers. We value the stock at 13x EV/EBITDA
and arrive at a fair value of Rs 419, an upside potential of 33%.

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Thanks Manish