Buy Network18 Media & Investments - Growth momentum continues - Elara Capital

• Network18 Media & Investments
• Rating : Buy
• Target Price : INR195
• Upside : 21%
• CMP : INR161 (as on 29 October 2010)

Growth momentum continues

Consolidated operations report 25% jump in revenues

Helped by a higher revenue growth from its key subsidiary IBN18, Network18 reported a consolidated revenue growth of 25% on a YoY basis. Revenue growth in Web18 and Homeshop18 also rebounded to high double digits during the quarter. The Q2FY11 also marked the revival in topline growth of the struggling Infomedia18.

Consolidated EBITDA turns black after six quarters

Growing profitability in IBN18 and business news operations helped Network18 to post EBITDA profits of INR40mn after running losses for six quarters. Operating costs during the quarter grew by just 4%, driven largely by the high operating leverage underplay in Viacom18 and strong cost reduction in the business news channels.

Expecting FY11E EBITDA to reach INR888mn

We expect Network18 to continue its progress on the profitability front and report an EBITDA of INR888mn in FY11E as the strong revival in Viacom18, business news channels and Web18 start boosting consolidated profits of the company. We expect Infomedia18, general news channels and standalone operations to continue making losses till FY12E due to lack of clear signals on a turnaround.

Valuation – Maintain Buy

We believe that as core assets of the company stage a turnaround going forward, the stock would start capturing the fair value of these entities. Further, the liquidation of Capital18 has the potential to provide upside triggers to the stock. Taking into account the value transfer through restructuring, and valuation upgrade in key subsidiary i.e. IBN18 post the distribution move, we maintain our 'Buy' recommendation on the stock with a one year forward target price of INR195, indicating an upside of 21% from the current levels.

Source : Equity Bulls

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