Hold Music Broadcast; target of Rs 15: ICICI Direct

ICICI Direct's research report on Music Broadcast

Music Broadcast (MBL) reported a weak set of Q4FY20 numbers. Revenues saw a steep decline of 44% YoY to Rs 45.9 crore impacted by a weak macroeconomic setup, which was further accentuated by a lockdown in the last two weeks of March. EBITDA was at -Rs 5.3 crore as it was impacted by lower topline and higher other expenses (including one-time expense of Rs 9.5 crore owing to loss allowance on doubtful debts & deposits and legal fees). Adjusted for one-offs, margin was at 9.2%, vs. 31% in Q3, clearly reflecting the negative operating leverage impact. Consequently, the company reported a net loss of Rs 8.9 crore.

Outlook

The radio segment continues to be steeply impacted by overall macroeconomic challenges as well as lower government spending. Covid-19 is a double whammy in this context and near term will witness a steep impact. The inherent weakness in key category (government spending, real estate, local segment) is likely to persist. Therefore, we downgrade the stock to HOLD with a revised target price of Rs 15/share (average of 3x FY22E EV/EBITDA and 11x FY22 P/E), as we bake in lower growth trajectory ahead.