Prabhudas Lilladher recommended Hold rating on Music Broadcast with a target price of Rs 17 in its research report dated May 26, 2020.
Prabhudas Lilladher's research report on Music Broadcast
We cut our EBITDA estimates by 79%/29% for FY21/FY22 respectively as 1) we expect inventory utilization for 28 legacy/11 batch 1 stations to be at 36%/30% in FY21 and 55%/40% in FY22 respectively since COVID-19 is expected to have an adverse impact on the overall demand environment (during lockdown period ad-revenue was lower by 80-85%) 2) government ad-volume (5% contribution in FY20 for top 15 markets) is unlikely to recover soon and 3) local advertisers who were so far resilient due to limited low cost options can postpone spending due to tighter liquidity situation (75% of provisioning on debt allowance of Rs49mn in 4QFY20 pertains to local advertisers). While MBL took various cost cutting initiatives (Rs302mn of optimization achieved in FY20) and managed to curtail its fixed cost to Rs100-110mn per month in lockdown, concerns on growth and margins have aggravated post-COVID. We expect sales & PAT to grow at a CAGR of 3.1% and 5.2% over FY20-22E.
Outlook
We maintain our target EV/EBITDA multiple of 3.5x (unchanged) and arrive at per share value of Rs15 per share. Our DCF enabled per share value now stands at Rs19. We arrive at blended TP (50% weight to each methodology) of Rs17 per share (earlier Rs21). Maintain HOLD.
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