MOSL: MUSIC BROADCAST (Buy)-Healthy growth trajectory in sight

​Music Broadcast: Healthy growth trajectory in sight

(RADIOCIT IN, Mkt Cap USD0.3b, CMP INR360, TP INR469, 30% Upside, Buy)

• Well-carved revenues: RADIOCIT reported a spectacular set of numbers, with revenues growing 12% YoY (+6% QoQ) to INR703m (12% beat). Like-to-like growth for the 28 legacy stations stood at 6% with revenue of INR666m; the balance INR40m was contributed by the new stations. Growth in the legacy stations was driven by price rise at the top 12 stations and higher utilization levels at the remaining 16 stations (capacity utilization of 70-80% at the 28 legacy stations v/s 25-35% at the new stations).
• EBITDA margin to endure: Driven by operating leverage, EBITDA surged 16% YoY (+34% QoQ) to INR222m (13% beat), with the margin expanding 100bp YoY (+660bp QoQ) to 31.5% (in-line). Fall in finance cost by 6% YoY (-35% QoQ) to INR39m, coupled with higher margin, provided impetus to PAT (INR108m; +42% YoY, +140% QoQ). The 28 legacy stations recorded EBITDA of INR233m and margin of 35% (450bp improvement), while the new 11 stations reported EBITDA loss of INR10-15m.
• Asset monetization phase to drive growth: Fresh inventory at the new stations, improving utilization at the legacy stations and pricing improvement at the top 12 stations are likely to lead to revenue CAGR of 15% over FY17-20. Further, RADIOCIT's high listenership base in top cities should steadily drive revenue market share improvement (~14% at present). Subsequently, margin improvement at the legacy stations and faster breakeven at the new stations should drive 20% EBITDA CAGR over the next three years, also backed by higher utilization and inherent fixed cost operating leverage.