Why Analysts Are Bullish On Radio Stocks
Whatever the verdict of India's general election next year, analysts are betting radio broadcast companies will win either way. The biggest reason: the government's expected advertising blitzkrieg.
Nine out of 11 analysts tracked by Bloomberg have a ‘Buy' rating on Entertainment Network India Ltd., India's largest radio broadcast company and the parent of Radio Mirchi. The stock has an upside potential of 16.4 percent. Music Broadcast Ltd., the holding company of Radio City, has 100 percent ‘buy' rating with a potential to rise as much as 23.3 percent.
“We remain bullish on the radio space. Higher government ad spend in the run-up to Lok Sabha election, recovery in major verticals like real estate and FMCG will aid revenues,” said Karan Taurani, vice president of research at Dolat Capital. Media Research User Council rating will also drive prices in tier 2 and 3 cities. When compared with Music Broadcast, ENIL trades at fair valuation and it has more upside potential given company's high growth prospect.”
Shares of both ENIL and Music Broadcast have fallen about 5 percent so far this year. Analysts expect a revival soon despite higher valuations—they trade at 40 and 30 times, respectively, to their earnings for the next financial year.
“The worst is probably over for ENIL. New stations will aid margins in FY19 as Batch-1 station have turned positive, while launch of Batch-2 stations will result in higher revenues,” said Ankit Kedia, senior vice president at Centrum Broking. “Possible acquisition of TV Today station would be a positive trigger for the stock.”
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