Dolat Capital is bullish on Music Broadcast has recommended buy rating on the stock with a target price of Rs 450 in its research report dated November 02, 2017.
Dolat Capital's research report on Dr.Reddy’s Laboratories
Revenue grew 10% YoY to ` 758mn (DCMe: ` 800mn) supported by pricing growth (+5%) in legacy stations and volume growth (+5%) in new stations. EBITDA margin improved 979bps YoY to 31.9% (DCMe: 31%) however on like to like basis margins declined 410bps YoY as EBITDA margin was 36% in Q2FY17 adjusting for bad debts provisioning led by losses in new stations. PAT declined 11.2% YoY to ` 127mn in line with our estimate (DCMe: ` 124mn) on back of lower margins and higher depreciation cost. Out of the eleven new stations acquired during phase 3 auction; five stations are operating at more than 30% utilisation level. Company expects these new stations to break even in 18-24 months from its launch (Q4FY17) with utilisation rate of 45-50%. There was pricing growth (+5%) in the legacy stations which are now operating at 36% EBITDA margin. New stations reported volume led growth (+5%). 8 stations of Radio Mantra contribute 15-18% of the revenue and are operating at 60% utilisation. MBL has taken price hike in some of the stations of Mantra and plans to do it for balance stations in the coming quarters. Post GST implementation, MBL witnessed slowdown from advertisers in the month of July & August but in September company witnessed some recovery. Company is witnessing an uptick in the industry due to festive season which aid to better revenue growth and margins in H2FY18. MBL strategy of limiting the cost per million and selecting the correct markets will help it to sustain the margins going ahead. MBL has reported a strong overall performance for second consecutive quarter despite challenges in the form of GST as it continues to gain market share; we expect growth momentum to pick up in Q3FY18 led by full impact of seasonality and believe it will continue to outperform larger peers in the near/medium term. Better pricing in H2FY18 and reduced losses in the new stations remain some of the levers that will help expansion of EBITDA margin.
We largely maintain our estimates and BUY recommendation with Sep’18 TP of ` 450 based on 16x one yr. fwd. EV/EBITDA.
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