Prabhudas maintains 'outperformer' on Saregama India; target Rs 186
Prabhudas Lilladher has maintained ‘outperformer’ rating on Saregama India for a target price of Rs 186, an upside of 84.2 per cent from current level.
By ET Online |
MUMBAI: Prabhudas Lilladher has maintained ���outperformer��� rating on Saregama India for a target price of Rs 186, an upside of 84.2 per cent from current level. The company has reported subdued Jan-Mar 2007-08 results with consolidated revenue of Rs 39.3 crore, growing by 37.1per cent year on year.
Despite higher contribution from non-physical music sales, losses in the movie segment resulted in subdued EBITDA margin of a meagre 4.9 per cent for the quarter. Consequently, net profits declined by 26.4 per cent year on year to Rs 3.2 crore.
Consolidated revenue for 2007-08 stood flat at Rs 142.3 crore (0.6% YoY decline). Operating margin contracted by 417 basis points year on year to 5.2 per cent. Contribution from the high margin non-physical music business increased from 29 per cent in 2006-07 to 41 per cent in 2007-08. However, new initiatives like the movie business has proved to be loss making (Rs 5.4 crore loss) and responsible for dragging the overall company margins. Consequently, profit after tax in 2007-08 declined by 41 per cent to Rs 8.5 crore.
The company didn't have any major music (film) releases; rather it had only one non-film music release - Classically Mild by Sonu Nigam, says Prabhudas.
For the quarter under review, the music segment reported EBIT margin of 23 per cent; however, the new business ventures (films/TV serials) reported an operating loss of Rs2.4 crore. Consequently, operating profit margin for the quarter stood at a meagre 4.9 per cent.
The company has seen an increase in contribution from digital mode of content, however, declining physical sales and piracy issues continue to be worrying factors. Again, some of the new initiatives ��� films and TV serials ��� have failed to deliver to their true potential, and has been a drag to the overall profitability of the company. Over the past quarter, the scrip has considerably underperformed market returns, says the brokerage.
At the current market cap the brokerage sees an immense strategic value for its repertoire of 300,000 songs. At the market price of Rs 101, the company trades at 12.1x FY09E and 8.1x FY10E earning estimates.
Despite higher contribution from non-physical music sales, losses in the movie segment resulted in subdued EBITDA margin of a meagre 4.9 per cent for the quarter. Consequently, net profits declined by 26.4 per cent year on year to Rs 3.2 crore.
Consolidated revenue for 2007-08 stood flat at Rs 142.3 crore (0.6% YoY decline). Operating margin contracted by 417 basis points year on year to 5.2 per cent. Contribution from the high margin non-physical music business increased from 29 per cent in 2006-07 to 41 per cent in 2007-08. However, new initiatives like the movie business has proved to be loss making (Rs 5.4 crore loss) and responsible for dragging the overall company margins. Consequently, profit after tax in 2007-08 declined by 41 per cent to Rs 8.5 crore.
The company didn't have any major music (film) releases; rather it had only one non-film music release - Classically Mild by Sonu Nigam, says Prabhudas.
For the quarter under review, the music segment reported EBIT margin of 23 per cent; however, the new business ventures (films/TV serials) reported an operating loss of Rs2.4 crore. Consequently, operating profit margin for the quarter stood at a meagre 4.9 per cent.
The company has seen an increase in contribution from digital mode of content, however, declining physical sales and piracy issues continue to be worrying factors. Again, some of the new initiatives ��� films and TV serials ��� have failed to deliver to their true potential, and has been a drag to the overall profitability of the company. Over the past quarter, the scrip has considerably underperformed market returns, says the brokerage.
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At the current market cap the brokerage sees an immense strategic value for its repertoire of 300,000 songs. At the market price of Rs 101, the company trades at 12.1x FY09E and 8.1x FY10E earning estimates.
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