Buy Music Broadcast; target of Rs 380: Motilal Oswal

Motilal Oswal's research report on Music Broadcast

Revenue grew by a healthy 14% YoY (+9% QoQ) to INR870m (in-line), driven by (i) contribution from the festive season, (ii) an 11% (v/s average of 8%) yield improvement at legacy stations and (iii) higher utilization at phase III stations (53% v/s average of 49%). EBITDA grew 23% YoY (+8% QoQ) to INR286m, missing our estimate by 6%, mainly on account of higher-than-expected increase in opex (+21% YoY) due to one-off. EBITDA margin expanded 225bp YoY (-30bp QoQ) to 32.9%, potentially due to higher contribution from new stations. PAT grew 38% YoY to INR164m (10% miss), mainly led by EBITDA growth and ~66% plunge in finance cost. For 9MFY19, revenue/EBITDA/PAT grew 9%/17%/22% YoY.

Outlook

We roll forward our valuations to FY21 and reduce our TP to INR380 (prior: INR420), reducing EV/EBITDA multiple to 10x (~40% discount to two-year average), given the concerns around traditional media. However, given the healthy 14% revenue CAGR over FY19-21E, the stock appears attractively priced at 7.8x EV/EBITDA on FY21E. Maintain Buy.