Result Update Music Broadcast Buy Stable growth quarter; strong outlook for H2FY18 MBL reports revenue growth of 11.9% YoY supported by higher utilisation in new stations. EBITDA margin improved 106bps YoY to 31.5% led by rate hike in legacy stations. Implementation of GST and decline in ad. rev. from the real estate vertical have negatively impacted ad. revenues in Q1FY18, as we expect a strong performance in H2FY18 led by seasonality. Growth in pricing for legacy stations and lower losses for new stations will continue to support EBITDA margin in FY18. MBL is currently our preferred pick within the media sector and we believe it will outperform ENIL in the near term; Maintain BUY with a Sep 18 TP of ` 440 (set at 16x EV/EBITDA). Revenue tad below estimates; PAT outperforms Revenue grew 11.9% YoY to ` 703mn (DCMe: ` 809mn) supported by the 11 new stations acquired in Phase 3 which turned operational. EBITDA margin improved 106bps YoY to 31.5% (DCMe: 35.2%) led by rate hike in legacy stations which offset the losses in new stations. PAT grew 42.3% YoY led by higher other income to ` 108mn (DCMe: ` 116mn). Healthy utilization rates across stations MBL had acquired 11 new stations during Phase 3 auction which were fully operational since Q4FY17; five out of the eleven new stations are operating at more than 30% utilization levels. Legacy stations are operating at utilization level of 70-80%. As per Air Check Data, MBL outperforms industry with volume growth of 4%YoY vs the latter which declined 5%YoY, as ENIL cuts ad.inventory; healthy volume supported utilization growth for MBL. Single digit growth in realization; expected to improve in H2FY18 Realization for top 12 stations of MBL grew in ~5%-6% as utilization rates seemed to have peaked out; management expects realization growth to be higher in H2 driven by seasonality and low base of DeMo (H2FY16). Metro cities continue to demand a huge premium pricing over other legacy stations. In terms of the balance legacy stations (16), utilization rate remains to be the growth driver. View MBL expects better growth in H2FY18 and is confident of reporting revenue growth above industry avgs. supported by new stations. Mgmt. expects five of the eleven new stations to break even towards H2FY19 which is better than their earlier guidance of all the new stations achieving break in H1FY20. As per RAM, MBL continues to dominate in Bangalore with highest listenership share and is at second rank in Mumbai. Absence of IPO expenses, better pricing in H2FY18 and lower losses in the new stations remain to be the levers that will help expansion of EBITDA margin (~40-50bpsYoY) in FY18. We maintain our BUY recommendation and rollover to Sep 18 TP of ` 440 based on 16x one yr. fwd. EV/EBITDA. Q1FY18 Result (` Mn) Particulars Q1FY18 Q4FY17 Q1FY17 QoQ(%) YoY(%) Revenue 703 666 628 5.6 11.9 EBITDA 222 166 192 33.6 15.8 Pre-Tax Profit 175 175 166 (0.1) 5.3 Net Profit 108 45 76 140.9 42.3 EPS (`) 1.9 1.0 1.8 97.9 5.0 Margins (%) bps bps EBITDA Margin 31.5 24.9 30.5 659 106 PBT Margin 24.8 26.3 26.4 (143) (155) Net Margin 15.4 6.8 12.1 866 329 CMP ` 360 Target / Upside ` 440/22% BSE Sensex 32,575 NSE Nifty 10,115 Scrip Details Equity / FV ` 571mn/` 10/- Market Cap ` 21bn USD 316mn 52 week High/Low ` 415/334 Avg. Volume (no) 77,581 NSE Symbol Bloomberg Code RADIOCITY RADIOCIT IN Shareholding Pattern Jun 17 (%) Promoters 71.4 MF/Banks/FIs 7.5 FIIs 4.1 Public / Others 17.0 Valuation (x) FY18E FY19E FY20E P/E 46.7 31.9 26.4 EV/EBITDA 16.3 13.4 11.1 ROE (%) 7.4 9.8 10.6 ROCE (%) 13.4 14.8 15.5 Estimates (` Mn) FY18E FY19E FY20E Net Sales 3,237 3,657 4,107 EBITDA 1,101 1,279 1,455 PAT 440 644 778 EPS (`) 7.7 11.3 13.6 Sr. Analyst: Karan Taurani Tel: +91 22 4096 9754 E-mail: karant@dolatcapital.com Associate: Vinesh Vala Tel: +91 22 4096 9736 E-mail: vineshv@dolatcapital.com August 02, 2017
Q1FY18 Performance (` mn) Q1FY18 DCMe Diff (%) Q4FY17 QoQ(%) Q1FY17 YoY(%) Revenue 703 809 (13.1) 666 5.6 628 11.9 EBITDA 222 285 (22.2) 166 33.6 192 15.8 Pre-Tax Profit 175 178 (1.9) 175 (0.1) 166 5.3 Net Profit 108 116 (6.6) 45 140.9 76 42.3 Margins (%) EBITDA Margin 31.5 35.2 24.9 30.5 106 Net Margin 15.4 14.3 6.8 12.1 329 Source: Company, DART Estimate Revision (` mn) New Old Change (%) FY18E FY19E FY18E FY19E FY18E FY19E Revenue 3,237 3,657 3,237 3,657 0.0 0.0 EBITDA 1,101 1,279 1,140 1,329 (3.4) (3.8) Pre-Tax Profit 666 975 705 1,026 (5.6) (4.9) Net Profit 440 644 465 677 (5.6) (4.9) EPS (`) 7.7 11.3 8.2 11.9 (5.6) (4.9) Margins (%) EBITDA Margin 34.0 35.0 35.2 36.4 Net margin 13.6 17.6 14.4 18.5 Source: Company, DART August 02, 2017 2
Income Statement (` mn) Particulars Mar17 Mar18E Mar19E Mar20E Net Sales 2,714 3,237 3,657 4,107 Total Expenditure 1,802 2,136 2,378 2,652 Raw Material (license fee) 192 243 265 281 Employee Expenses 651 774 860 954 Marketing Exp 240 281 320 360 Other Expenses 719 838 933 1,057 Gross Profit 2,522 2,994 3,392 3,826 EBIDTA 913 1,101 1,279 1,455 Depreciation 197 299 303 307 EBIT 716 802 977 1,149 Finance Cost 190 163 28 4 Other Income 44 27 26 35 Profit Before Tax 570 666 975 1,179 Tax 203 226 332 401 Net Profit 367 440 644 778 Balance Sheet (` mn) Particulars Mar17 Mar18E Mar19E Mar20E Sources of Funds Equity Capital 571 571 571 571 Other Reserves 4,911 5,350 5,994 6,772 Net Worth 5,481 5,921 6,564 7,343 Secured Loans 553 53 53 53 Unsecured Loans 0 0 0 0 Loan Funds 553 53 53 53 Total Capital Employed 5,782 5,974 6,618 7,396 Applications of Funds Gross Block 3,528 4,536 4,596 4,656 Less: Acc. Depreciation 1,313 1,420 1,718 2,021 Net Block 3,116 2,877 2,635 2,388 Investments 268 268 268 268 Current Assets, Loans & Advances Sundry Debtors 817 974 1,100 1,236 Cash and Bank Balance 2,679 2,636 3,487 4,478 Loans and Advances 250 299 337 379 Other Current Assets 229 274 309 347 sub total 3,975 4,182 5,233 6,440 Less: Current Liabilities & Provisions Current Liabilities 1,577 1,353 1,518 1,700 sub total 1,577 1,353 1,518 1,700 Net Current Assets 2,398 2,829 3,715 4,740 Total Assets 5,782 5,974 6,618 7,396 E Estimates Cash Flow (` mn) Particulars Mar17E Mar18E Mar19E Mar20E Profit before tax 570 666 975 1,179 Depreciation & w.o. 197 299 303 307 Net Interest Exp 146 136 1 (31) Direct taxes paid (203) (120) (176) (401) Change in Working Capital 568 (473) (36) (34) (A) CF from Opt. Activities 1,277 508 1,068 1,021 Capex (156) (60) (60) (60) Free Cash Flow to Firm 1,121 448 1,008 961 Inc./ (Dec.) in Investment (121) - - - (B) CF from Invt. Activities (276) (60) (60) (60) Inc./(Dec.) in long Debt 230 - - - Inc./(Dec.) in short Debt (986) (500) - - Other 2,275 10 (157) 30 (C) CF from Financing 1,519 (490) (157) 30 Net Change in Cash 2,519 (42) 851 991 Opening Cash balances 159 2,678 2,636 3,487 Closing Cash balances 2,679 2,636 3,487 4,478 Important Ratios Particulars Mar17 Mar18E Mar19E Mar20E (A) Measures of Performance (%) EBIDTA Margin 33.6 34.0 35.0 35.4 EBIT Margin 26.4 24.8 26.7 28.0 Interest / Sales 7.0 5.0 0.8 0.1 Tax/PBT 35.7 34.0 34.0 34.0 Net Profit Margin 13.5 13.6 17.6 18.9 (B) As Percentage of Net Sales License Fee 7.1 7.5 7.3 6.9 Employee Expense 24.0 23.9 23.5 23.2 Other Expenses 26.5 25.9 25.5 25.7 (C) Measures of Financial Status Debt / Equity (x) 0.1 0.0 0.0 0.0 Interest Coverage (x) 0.3 0.2 0.0 0.0 Average Cost of Debt (%) 16.4 53.8 52.1 8.0 Debtors Period (days) 110 110 110 110 Fixed Assets Turnover (x) 0.9 1.1 1.4 1.7 WC Turnover (x) 1.1 1.1 1.0 0.9 Non-Cash WC (` Mn) (281) 193 229 262 (D) Measures of Investment EPS (`) 6.4 7.7 11.3 13.6 CEPS (`) 9.9 12.9 16.6 19.0 Book Value (`) 96.1 103.8 115.1 128.7 RoANW (%) 6.7 7.4 9.8 10.6 RoACE (%) 12.4 13.4 14.8 15.5 RoAIC (%) (Ex. Cash & Inv.) 23.1 24.0 31.2 39.4 (E) Valuation Ratios CMP (`) 360 360 360 360 P/E (x) 56.0 46.7 31.9 26.4 Market Cap. (` Mn) 20,544 20,544 20,544 20,544 MCap/ Sales (x) 7.6 6.3 5.6 5.0 EV (` Mn) 18,418 17,961 17,110 16,119 EV/Sales (x) 6.8 5.5 4.7 3.9 EV/EBDITA (x) 20.2 16.3 13.4 11.1 P/BV (x) 3.7 3.5 3.1 2.8 FCFE Yield (%) 1.8 (0.3) 4.9 4.7 E Estimates August 02, 2017 3
Mar-17 Mar-17 Mar-17 DART RATING MATRIX Total Return Expectation (12 Months) Buy > 20% Accumulate 10 to 20% Reduce 0 to 10% Sell < 0% Rating and Target Price History 500 Music Broadcast Target Rating TP (`) CMP (`) 450 Jun 17 Buy 440 339 400 350 300 250 DART Team Purvag Shah Managing Director purvag@dolatcapital.com +9122 4096 9747 Amit Khurana, CFA Head of Equities amit@dolatcapital.com +9122 4096 9745 CONTACT DETAILS Equity Sales Designation E-mail Direct Lines Kishor Bagri, CFA VP - Equity Sales kishorb@dolatcapital.com +9122 4096 9746 Kartik Sadagopan VP - Equity Sales kartiks@dolatcapital.com +9122 4096 9762 Kapil Yadav VP - Institutional Sales kapil@dolatcapital.com +9122 4096 9735 Yomika Agarwal VP - FII Sales yomika@dolatcapital.com +9122 4096 9773 Equity Trading Designation E-mail P. Sridhar VP and Head of Sales Trading sridhar@dolatcapital.com +9122 4096 9728 Chandrakant Ware AVP - Equity Sales Trading chandrakant@dolatcapital.com +9122 4096 9707 Derivatives Trading Designation E-mail Shirish Thakkar AVP - Derivatives shirisht@dolatcapital.com +9122 4096 9702 Hardik Mehta Sales Trader hardikm@dolatcapital.com +9122 4096 9748 Dolat Capital Market Private Limited. 20, Rajabahadur Mansion, 1st Floor, Ambalal Doshi Marg, Fort, Mumbai - 400 001
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