Buy Oriental Bank of Commerce; Target : Rs 358 ::ICICI Securities

t o u g h   t i m e s   a h e a d …
Oriental Bank of Commerce’s (OBC)  Q2FY12 profit at | 168 crore was
abysmally below Street and our expectations (| 349 crore) with GNPA
shooting up from | 2035 crore in Q1FY11 to | 3111 crore. Even though
sequential business growth was healthy at 5.1%, NII declined 8.1% YoY
(2.8%QoQ) to | 989 crore due to interest income reversal of | 137 crore
on account of high slippages. Consequently, NIM declined 30 bps to
2.64%. Out of total slippages of | 1503 crore this quarter | 700 crore was
due to migration of sub 10 lakh loans to system based NPA recognition.
This pushed up provision for NPA by 153% QoQ to | 342 crore, thus
wiping profits. These windfall slippages would impact interest income,
going ahead, as well. Moreover, slippages expected in H2FY12 would
push up credit costs further. Hence, we have cut our earnings estimates
for FY12E and FY13E by 25% and 24%, respectively. We expect higher
GNPA at 2.5% and NNPA at 1.2% to stay till FY13E.
ƒ Business crosses | 2500 bn milestone, margins contract to 2.64%...
Total business grew 19.6% YoY  (5.1% QoQ) to | 255163 crore.
Deposits grew 18.9% YoY (3.5% QoQ) to | 149552 crore while
advances increased 20.1% YoY (7.5% QoQ) to | 105611 crore. We
expect credit growth of 18.5% as against 20% targeted by the bank
for FY12E. Even though CASA was flat QoQ at 22.9%, NIM
contracted by 30 bps QoQ to 2.64% with YoA rising only 27 bps
QoQ as against a 44 bps rise in CoD.
ƒ Asset quality concerns to stay…
Total slippages amounted to | 1503 crore out of which | 700 crore
was due to migration of sub | 10 lakh loans to system based NPA
recognition with the agri segment accounting for | 375 crore and
retail segment for | 327 crore. GNPA surged 52.9% QoQ to | 3111
crore (GNPA ratio: 2.95%) while  NNPA rose 86.8% QoQ to | 1978
crore  (NNPA  ratio:  1.9%).  We  expect  slippages  to  stay  high  in
H2FY12E and expect GNPA at 2.5% and NNPA at 1.2% by FY13E.
V a l u a t i o n
The stock is trading at a low 0.8x  FY13E ABV at the CMP of | 290. We
expect slippages to continue and have lowered our earning estimates,
thus depressing FY13E ABV by 9% to | 377. With lower RoA and RoE of
0.9% and 13.7%, respectively, for FY13E, we have valued the stock at
0.9x FY13E ABV at | 358.

Buy Entertainment Network Limited (ENIL) Target :Rs 291 ::ICICI Securities

B e t t e r   u t i l i s a t i o n ;   c h a l l e n g i n g   t i m e s   a h e a d . . .
Entertainment Network Ltd (ENIL) reported its Q2FY12 numbers, which
were in line with our expectations on the topline front. The consolidated
topline for the company stood at | 70.1 crore against our expectation of |
74.6 crore. YoY comparisons are not prudent for consolidated numbers
as the company has hived off its  outdoor business. The standalone
topline stood at | 69.2 crore, growing 10.1% YoY on the back of 11.9% ad
revenue growth, which can be attributed to higher utilisation. The
blended capacity utilisation stood at 65.3% against 58.0% in Q2FY11.
ENIL reported standalone EBITDA of | 18.4 crore with an EBITDA margin
of 26.5%. The consolidated EBITDA margin stood at 24.8%. The company
reported standalone PAT of | 9.0 crore growing 80.2% YoY. The
consolidated profit stood at | 8.3 crore.
Highlights of the quarter
Ad revenue growth in this quarter was better than the previous quarter in
spite of it being a seasonally weak quarter. The radio business exhibited a
growth of 11.9% YoY in Q2FY12 in a challenging environment. The
blended utilisation level showed an increase from 58.0% in Q2FY11 to ~
65.3% in this quarter. The EBITDA margin in the radio business improved
152 bps to 26.5% from 25.0% in Q2FY11, in spite of higher marketing
expenses in this quarter, due to higher capacity utilisation.
V a l u a t i o n
We have valued the stock on an  SOTP basis, evaluating the radio
business on DCF and event business on EV/sales. Assuming revenue
CAGR of 12.7% over FY11E-FY20E and  terminal growth of 4%, thereon,
we have arrived at a target price of | 288/share for the radio business. We
have valued the event business at 1.0x FY13 EV/sales to arrive at a
valuation of | 2.2/share. The stock is currently trading at | 254. Our target
price implies an upside potential of 15%. We maintain our BUY rating.