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Research
Accumulate Network18 Media & Investments for target of Rs 170 - Elara Capital
Posted On : 2010-06-01 20:16:05( TIMEZONE : IST )
- Rating : Accumulate
- Target Price : INR170
- Upside : 7%
- CMP : INR159 (as on 28 May 2010)
Consolidated revenues reach all time high
Network18 enjoyed strong revenue growth from all of its key subsidiaries, which helped it reach the highest ever quarterly revenues of INR3990mn in Q4FY10, up 175% on a YoY basis. The company has reached INR12.7bn in operating revenues in FY10, up from INR7.6bn in FY09, riding on strong revenue growth in IBN18 during the year. Going forward, we expect the company to cross INR19bn in consolidated revenues by FY12E, driven by expected revival in TV18 and IBN18.
FY10 losses significantly trimmed
As mentioned in our earlier report on the company, Network18 is expected to be the key beneficiary of strong profit growth momentum in its key subsidiaries, TV18 and IBN18, which would help it report better operating performance going forward. The company is very close to reporting a positive EBITDA, as consolidated EBITDA improved from negative INR1.8bn in Q4FY09 to just –INR1mn in Q4FY10. EBITDA loss for FY10 got trimmed down significantly from INR2bn in FY09 to INR778mn in FY10. This was mainly driven by TV18 and IBN18 posting better earning numbers during the quarter. We expect both TV18 and IBN18 to start reporting strong EBITDA numbers going forward, which would lift up Network18's consolidated EBITDA to INR1.5bn by FY12E.
Valuation
Network18 stock has performed impressively post the completion of recent fund raising initiative across the group level, as the concerns regarding absent profitability in key subsidiaries and stretched balance sheet got addressed in the last quarter. We reiterate our intention to collect the stock on dips as it provides and excellent play on media growth story with leading media brands. We recommend Accumulate on the stock with a one year SOTP based target price of INR170, taking into account one year forward target market cap of TV18 and IBN18.
