Music Broadcast (RADIOCIT IN) - Q4FY22 Result Update - Yield recovery holds key - HOLD

Rating: HOLD | CMP: Rs23 | TP: Rs24

Quick Pointers:

§  Blended inventory utilization was ~70-75% in 4QFY22.         

§  Radio City’s ad-volumes (top 15 markets) increased 9% YoY in 4QFY22. In comparison, industry ad-volumes were up 17% YoY.             

We cut our FY23E/FY24E EBITDA estimates by 15%/12% respectively as yields which are at ~35-40% discount as compared to pre-COVID levels may take longer to recover. However, ad-volumes have shown signs of improvement with inventory utilization of 26%/54%/77%/75% in 1Q/2Q/3Q/4Q respectively which is encouraging. We believe MBL has fared well in this challenging environment with 1) volume market share of 21% in FY22 across main frequencies and 2) 2nd highest client count share of 41% in the industry in 4QFY22.

We retain our HOLD rating given    1) strong liquidity position (Rs2,640mn of cash balance as on FY22) 2) stringent focus on cost control and 3) new initiatives taken (long term deals, digital & content integration exercises) to boost sales in this environment (contributed Rs148mn to sales in 4QFY22). Our TP (50% weight to DCF and EV/EBITDA methodology) remains intact at Rs24. We value the stock at 5.5x FY24 EBITDA.

Ad-volumes growth lower than the industry: Revenue increased 8.3% YoY to Rs460mn (PLe of Rs426mn). While Radio City’s ad-volumes (top 15 markets) increased 9% YoY, it was lower than the industry growth of 17% YoY as tactical discounts were withdrawn thereby impacting volumes. Except for FMCG & government sector, ad-volumes across most categories like real estate, finance, pharma & auto witnessed strong growth in 4QFY22.

PAT turns negative due to higher provisioning: EBITDA declined 34.8% YoY to Rs19mn (PLe of Rs57mn) with a margin of 4.1% (PLe of 13.4%) as against 6.8% in 4QFY21. PAT loss stood at Rs21mn (PLe loss of Rs3mn) versus a loss of Rs39mn in 4QFY21. There was additional provisioning of Rs45mn (part of other expenses) relating to receivables in 4QFY22. Adjusting for this, EBITDA/PAT came in at Rs64mn/Rs24mnn with 13.9%/5.3% margin respectively.

Con-call highlights: 1) Revenue in March 2022 was ~Rs180mn. Similar run rate is likely to be maintained going forward. 2) There was a revenue loss of Rs40-50mn in 4QFY22 due to Omicron. 3) Revenue contribution from Legacy/Batch-1 stations was ~85%/~15%. 4) Revenue share of digital business was ~6%. 5) New revenue opportunities contributed Rs148mn. 6) Other expenses increased due to receivable provisioning of Rs45mn in 4QFY22. In FY22, provisions stood at Rs60mn. 7) Blended utilization was 70-75% in 4QFY22. 8) Yields are at 60-65% of pre-COVID levels. 9) Employee cost is expected to be in the range of Rs140-150mn on quarterly basis. 10) Ad revenue breakup from local/national advertisers is 65%/35% respectively. 11) Revenue in 1QFY23 is expected to be similar to 4QFY22.