MOSL: MUSIC BROADCAST (Buy)-Festive season shift hurts performance; Healthy outlook

Music Broadcast: Festive season shift hurts performance; Healthy outlook

(RADIOCIT IN, Mkt Cap USD0.3b, CMP INR332, TP INR420, 26% Upside, Buy)

• Muted earnings growth: Revenue grew 6% YoY (6% QoQ; 3% miss) to INR801m primarily due to the festive season shifting to 3QFY19 and on sluggish retail advertiser spends. Both volume and yield improvement contributed equally to the overall growth. Higher contribution from new stations aided healthy 10% YoY growth in overall EBITDA to INR266m (in-line). Yet, PAT at INR134m grew by 5% YoY (in-line) at a slower pace than EBITDA growth due to high tax expenses.
• 1HFY19 performance: Revenue/EBITDA/adj. PAT grew 7%/13%/14% YoY in 1HFY19. EBITDA margin expanded 200bp YoY to 33.8%. For 2HFY19, we expect revenue/EBITDA/adj. PAT growth of 18%/17%/29%.
• Growth contributed equally by legacy and new stations: Revenue/EBITDA growth at legacy stations remain muted, up marginally 2% YoY to INR721m/INR260m; EBITDA margin remained flat YoY at 36%. Revenue contribution from new stations saw an uptick to 10% (INR80m, +66% YoY). EBITDA stood at INR6m (EBITDA loss in 2QFY18), but was lower sequentially; margin stood at 8%.
• Concall highlights: (1) Shifting of festive season to 2H and boost from pre-election spends should drive mid-teens growth in 2HFY19, (2) maintain 12-14% revenue growth guidance in FY19, outperforming radio industry (8-10%) growth, (3) expect Ministry of Information and Broadcasting (MIB) approval for acquisition of Friends 91.9 FM radio station by 3QFY19.