Invest in Entertainment Network for Long Term
Investors with a long-term perspective can buy the stock of Entertainment Network India (ENIL), which operates the radio channel, Radio Mirchi 98.3 FM. Within the media sector, radio is poised to record the fastest growth in advertising spends, although on a low base. It is also likely to be less vulnerable to any slowdown in advertising spends given its lower advertising rates compared to television and print. As a market leader with a 47-48 per cent share of the radio industry and an increasing presence in the other emerging and promising media platforms – outdoor advertising and event management – ENIL is a unique play within the listed media space.
ENIL has successfully rolled out 22 radio stations over the past year, taking its total number of stations to 32. New stations weighed on profitability in 2007-08, with margins on a standalone basis dropping by about 200 basis points to about 24 per cent. Operating margins of its 10 legacy stations are, however, at close to 40 per cent levels. Margins have also improved sequentially, which suggests rising profitability in newer radio stations as well. There is, therefore, significant headroom for margins to expand once the new radio stations start maturing.
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