MOSL: MUSIC BROADCAST (Buy)-Weak ad market drags revenue — a first in many quarters
MUSIC BROADCAST: Weak ad market drags revenue — a first in many quarters
(RADIOCIT IN, Mkt Cap USD0.2b, CMP INR47, TP INR65, 38% Upside, Buy)
- Lower revenue weighs down EBITDA and PAT: Revenue decline of 8% YoY to INR698m (15% below est.) was a first in many quarters. Delayed national campaigns, decreasing low-yield local ads, and muted government/political advertisements led the revenue decline. Yield rose 4% in the top-12 markets. EBITDA declined 21% YoY to INR205m (22% miss) on pre Ind-AS 116 basis (EBITDA was INR18m on reported basis, down 14% YoY). EBITDA margins were down 500bp to 29.4%, (260bp miss), as opex remained flat QoQ. Subsequently, PAT declined 36% YoY to INR87m on pre Ind-AS 116 basis (down 38% YoY to INR84m on reported basis).
- Concall highlights: (a) Industry ad volumes were down 9% v/s 12% for MBL. Both national (12-13%) and local ad volumes (5-6%) were down on the back of weak economic conditions. (b) Management believes that ad volumes have bottomed out in 1QFY20 and anticipates demand revival next quarter onwards, aided by the festive season. (c) MBL's ad pricing is at ~10-15% premium to peers and at ~30% premium to local players. (d)) Cash balances and short-term investments stood at INR26b in 1QFY20.
- FY20 EBITDA est. cut by 9% on grim environment, loss of market share: Given the broad- based weak ad outlook, smaller players are undercutting ad pricing to gain local ads, while MBL's ad pricing is at ~35% premium to local players. The outlook now hinges on recovery of ad spends from national advertisers. Thus, we have cut FY20 revenue est. by 8%. However, management's tight control on costs in a difficult environment led to a lower cut in EBITDA est. by 9%. Subsequently, we build in FY20 EBITDA/PAT growth of 6%/-1% on post IND-AS 116 basis.
- Valuation view: We ascribe 9x (60% discount to two-year average since the IPO) to FY21 EBITDA, arriving at TP of INR65 (prior: INR70). Recovery in ad spends should drive strong operating leverage due to its stable cost. Maintain Buy.
Music Broadcast Limited, formerly known as Music Broadcast Pvt Ltd, owns and operates Radio City 91.1FM, which is a frequency modulation (FM) radio brand, and PlanetRadioCity.com, which is a music portal. Apart from Radio City Fun Ka Antenna, PlanetRadiocity.com has around 20 other Web radio streams, which include Radio City Indipop, Radio City Freedom, Radio City Smaran, Radio City Hindi, Radio City Tamil, Radio City Malayalam, Radio City International, Radio City Love, Radio City Classics, Radio City Dance, Radio City Fusion, Radio City Kannada, Radio City Rock, Radio City Electronica, Radio City Ghazal, Radio City Ishq, Radio City Metal, Radio City Faith, Radio City Wellness and Radio City Sufi. The PlanetRadioCity.com Website also features, news, videos, access to Radio City radio jockeys (RJs), Shows, Radio City properties and scoops on celebrities at Radio City. The Company has operations in around 20 cities in India.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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