Music Broadcast Ltd. share price target

We are BUYERs with TP of Rs 827 on ENIL and Rs 492 on MBL (both based on 30x FY20E FCFE). Radio businesses in India need to be valued on FCFE rather than PE, given upfront investments for 15-year licenses. The Indian Radio sector reported a healthy 17% ad revenue growth over FY14-16, despite stagnant advertising inventory. Over FY16-18E, revenue growth struggled at ~4.7% CAGR, despite a 33% est. addition to advertising inventory from new frequency additions. A slowdown in ad spends (owing to demonetization, GST and RERA) was apparent. This subdued show coincided with heavy upfront investments in Phase II license renewals and Phase III auctions in FY16/17 that dragged profitability.

We met the management of Music Broadcast (MBL) to understand its growth prospects and plans ahead. It is one of the leading private FM radio broadcasters in India with the brand Radio City. The company has 39 frequencies currently, including eight stations acquired from Radio Mantra and 11 acquired via Phase III auctions. MBL's operating revenues, EBITDA grew at 21%, 29% CAGR in FY14-17 to | 271.4 crore, | 91.1 crore, respectively. Radio City posted a six year CAGR of ~12.1% vs. 9.1% by industry in advertising volumes. It indicated triggers such as...

Revenue grew 5% YoY (flat QoQ; in-line) to INR762m, led by volume growth (mainly at new stations). While October 2017saw an impact of a higher revenue base (Diwali was in October 2016), November and December 2017 witnessed ~20% revenue growth, partly attributed to a low base (November and December 2016 suffered due to demonetization). EBITDA declined 12% YoY (+4% QoQ) to INR233m (14% miss) due to a sharp 23% YoY rise in SG&A expenses, particularly on account of the launch of new stations and marquee properties. PAT increased 16% YoY to INR119m (16% miss), led by net finance income of INR4m (v/s net finance cost of INR44m YoY). Revenue for new stations rose to INR48m, leading to overall revenue growth of 5% YoY. This was led by higher volumes in new stations (35% utilization); legacy stations??? volumes continued to de-grow by 3-4%. However, a 5% yield improvement provided solace to legacy stations??? revenue (at INR714m; flat YoY) and EBITDA margin (at ~34%). Avg. utilization across 39 stations stands at 60-65%. Though government/real estate sectors remain laggards, other sectors (led by FMCG/ auto) are eying a recovery.

Local advertisers one of the key drivers of growth continue to feel the heat of GST. Momentum in real estate and government ads too remains weak. However, national FMCG advertisers have started increasing ad spend, which provides some comfort. We estimate FY18 revenue/EBITDA growth at 12%/7%. Management expects the newer stations to breakeven by H1FY19. This should help MBL record healthy EBITDA growth of 35% in FY19. Over the longer term, management expects to outpace industry growth by 1-2%, continuing its trend of doubling revenues in five years....

Music Broadcast Limited (MBL) is engaged in the business of operating private FM radio stations through the brand Radio City promoted by Jagran Prakashan Ltd. Advertisements contributes ~99% of its revenues. Radio City is the first private FM radio broadcaster in India. MBL has expanded its presence with radio stations from 4 cities in 2001 to 37 cities as on February 2017 and additional two stations are expected to be operationalised by April 2017. MBL is present in 12 out of the top 15 cities in India by population. As on March, 2016 it has over 4.96cr...

Weak market conditions: Revenue increased 9.5% YoY to INR758m. Growth could have been better if not for the impact of GST, demonetization and RERA. EBITDA plunged 16% YoY (+9% QoQ) to INR242m (in-line) as the base quarter had a favorable impact of INR37m due to provision reversal. Adjusted for the same, EBITDA declined 3% YoY due to higher opex in new stations. Adj. margin shrunk 390bp YoY. Adj. PAT increased 10% YoY, benefiting from finance income. Old stations garner healthy margins: The 28 legacy stations grew ~5% YoY,...

Long term barriers a positive for Industry: Radio Industry is protected by licenses for 15 years, thereby restricting the entry of new players. This would support the existing companies to strengthen their position and maintain a healthy growth rate. The new radio stations are being added in the semi-urban areas which is positive for the ..

We met the management of Music Broadcast (MBL) to understand its growth prospects and plans ahead. It is one of the leading private FM radio broadcasters in India with the brand Radio City. The company has 39 frequencies currently, including eight stations acquired from Radio Mantra and 11 acquired via Phase III auctions. MBL's operating revenues, EBITDA grew at 21%, 29% CAGR in FY14-17 to | 271.4 crore, | 91.1 crore, respectively. Radio City posted a six year CAGR of ~12.1% vs. 9.1% by industry in advertising volumes. It indicated triggers such as...

Music Broadcast provides a pure play in the radio space which is forecasted to grow at CAGR of 16.9% over 2015-2020. It has licenses for 39 cities of which 37 cities are already operational giving its presence in 12 of the top 15 cities. Its brand Radio City' has a strong listenership in most of the markets where it is present. Further, Music Broadcast has a track-record of growing faster than the industry which we believe it can continue going forward....

Music Broadcast Limited operates their radio stations under the brand Radio City. Radio City is the first private FM radio broadcaster in India. The company has grown their presence from 4 cities in 2001 to 37 cities as on February 15, 2017. These radio stations include the 8 Radio Mantra Stations transferred from Shri Puran Multimedia Ltd (SPML) pursuant to the Scheme of Arrangement and 9 out of 11 New Radio City Stations. The company has presence in 12 out of the top 15 cities in India by population. As on March 31, 2016, their radio stations reached out to over 4.96 crores listeners in 23 cities covered by AZ Research. All their Phase II Radio City Stations has been migrated to the Phase III Policy. These include Radio City stations which are present at Bengaluru, Lucknow, Mumbai, New Delhi, Chennai, Pune, Hyderabad, Ahmedabad, Surat, Nagpur, Jaipur,...