Turned Rs 1 lakh to Rs 9 lakh in 3 years! Analysts see more upside in this multibagger debt-free firm
Better-than-expected financial result in the September quarter has once again brought this music label company into the limelight. On a year-to-date basis, shares of the company have declined 27 per cent till November 4, 2022. However, the scrip has soared 856 per cent to Rs 382 in the past 3 years, while the benchmark equity index BSE Sensex gained nearly 51 per cent during the same period. Market watchers turned bullish on the company post Q2 results.
This is Saregama India. The rise in share price indicates that an investment of Rs 1 lakh in the company in November 2019 would have turned to over Rs 9.50 lakh at present.
Saregama is IndiaтАЩs oldest music label with around 1.42 lakh songs across various languages, which is monetised over various formats such as digital (streaming, YouTube), physical (Carvaan) and television. Apart from music, it is also into TV serials, creates low-budget films as well as web series for OTT platforms through Yoodlee Films and has artists and events management business.
Financial performance
For the latest quarter ended September 2022, the debt-free company posted the highest-ever consolidated gross sales of Rs 189.16 crore, up 30 per cent year-on-year. On the other hand, the consolidated net profit of the company increased 36 per cent YoY to Rs 46 crore. Earlier, Saregama India reported 31 per cent YoY growth in consolidated gross sales at Rs 580.63 crore for the year ended March 2022. The bottom line jumped nearly 35 per cent YoY to Rs 152.65 crore.
Commenting on the second quarter result, JM Financial in a report said that SaregamaтАЩs consolidated revenue growth came ahead of their estimates. тАЬThe beat was mainly driven by better-than-expected growth in music retail, films and TV serials and publication businesses. PAT also came ahead of our expectations on the back of better-than-expected topline growth and other income,тАЭ the brokerage said.
Should you invest now?
Analysts see over 15 per cent upside in Saregama India from the current market price. While upgrading the stock to тАШBuyтАЩ from тАШHoldтАЩ, ICICI Securities has set a target price of Rs 460 for Saregama India.
тАЬWe expect digital monetisation to provide sustained growth momentum. Accelerated opportunity fructification in new areas like web series and artist management can provide a further positive surprise. Post 27 per cent decline in stock in 2022 YTD, we upgrade from тАШHoldтАЩ to тАШBuyтАЩ,тАЭ ICICI Securities said.
On the other hand, JM Financial has fixed a target price of Rs 450 for Saregama India.
тАЬIf Saregama successfully executes its new content acquisition strategy, its music licensing business can easily deliver around 23 per cent CAGR over FY22-25E (around 1.5 times industry growth). While EBIT in the near term would likely see a correction to 25.3 per cent in FY23 against 30 per cent in FY22 due to expensing out of new investments, we expect a strong recovery in the medium term driven by scale benefits and factor in a 300bps improvement over FY23-25E,тАЭ JM Financial said in a report.
The brokerage further raised FY23-25 EPS by 3-4 per cent for Saregama India driven by better-than-expected results in Q2.
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