Music Broadcast
BSE SENSEX
32,575
S&P CNX
10,115
1 August 2017
1QFY18 Results Update | Sector: Media
CMP: INR360
TP: INR469 (+30%)
Buy
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Healthy growth trajectory in sight
Well-carved revenues:
RADIOCIT reported a spectacular set of numbers,
with revenues growing 12% YoY (+6% QoQ) to INR703m (12% beat). Like-to-
like growth for the 28 legacy stations stood at 6% with revenue of INR666m;
the balance INR40m was contributed by the new stations. Growth in the
legacy stations was driven by price rise at the top 12 stations and higher
utilization levels at the remaining 16 stations (capacity utilization of 70-80%
at the 28 legacy stations v/s 25-35% at the new stations).
EBITDA margin to endure:
Driven by operating leverage, EBITDA surged 16%
YoY (+34% QoQ) to INR222m (13% beat), with the margin expanding 100bp
YoY (+660bp QoQ) to 31.5% (in-line). Fall in finance cost by 6% YoY (-35%
QoQ) to INR39m, coupled with higher margin, provided impetus to PAT
(INR108m; +42% YoY, +140% QoQ). The 28 legacy stations recorded EBITDA
of INR233m and margin of 35% (450bp improvement), while the new 11
stations reported EBITDA loss of INR10-15m.
Asset monetization phase to drive growth:
Fresh inventory at the new
stations, improving utilization at the legacy stations and pricing
improvement at the top 12 stations are likely to lead to revenue CAGR of
15% over FY17-20. Further, RADIOCIT's high listenership base in top cities
should steadily drive revenue market share improvement (~14% at present).
Subsequently, margin improvement at the legacy stations and faster
breakeven at the new stations should drive 20% EBITDA CAGR over the next
three years, also backed by higher utilization and inherent fixed cost
operating leverage.
Maintain Buy with TP of INR469:
RADIOCIT is valued at 13x EV/EBITDA on
FY19E, at a 30-35% discount to ENIL, despite its improved market share and
profitability. Improving earnings and RoIC from 13% currently to 26% in FY20
should reduce valuation discount to ENIL. We maintain
Buy,
assigning 18x
EV/EBITDA on FY19E, arriving at a target price of INR469.
FY17
FY18
4Q
666
12.7
500
166
24.9
56
59
17
68
23
33.3
45
-75.7
6.8
1Q
703
11.9
481
222
31.5
64
39
47
166
57
34.6
108
42.3
15.4
2QE
903
11.5
594
309
34.2
64
39
48
254
88
34.6
166
2.4
18.4
3QE
817
12.2
522
295
36.1
64
39
48
240
83
34.6
157
29.9
19.2
4QE
749
12.6
537
212
28.3
64
42
48
154
53
34.6
101
123.5
13.4
FY17
2,714
20.7
1,802
913
33.6
197
190
44
570
203
35.7
367
32.7
13.5
FY18E 1QFY18E
3,172
626
16.9
-0.3
2,135
429
1,037
197
32.7
31.5
257
50
157
36
191
56
813
166
281
58
34.6
34.6
532
109
45.0
42.6
16.8
17.4
Variance
(%)
12.2
12.1
12.5
8 bps
27.7
6.2
-16.1
-0.2
-0.2
0.1
-0.3
-193 bps
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
RADIOCIT IN
57.1
20.5/0.3
420 / 333
-3 /- /-
162
28.6
2019E
3,611
1296
798
14.0
50.1
119.4
12.4
12.3
25.8
3.0
13.4
Financials & Valuations (INR m)
2017 2018E
Y/E Mar
Net Sales
2,714 3,172
EBITDA
913
1037
Adj PAT
367
532
Adj EPS (INR)
6.4
9.3
Gr. (%)
0.3
45.0
BV/Sh (INR)
96.1 105.4
RoE (%)
11.2
9.3
RoCE (%)
8.8
9.4
P/E (x)
56.2
38.7
P/BV (x)
EV/EBITDA (x)
3.8
21.3
3.4
17.7
Estimate change
TP change
Rating change
Quarterly Performance (INR m)
Y/E March
1Q
628
38.0
437
192
30.5
45
41
11
116
40
34.5
76
-27.5
12.1
Net Sales
YoY Change (%)
Total Expenditure
EBITDA
Margins (%)
Depreciation
Interest
Other Income
PBT before / after EO expense
Tax
Rate (%)
Reported PAT
YoY Change (%)
Margins (%)
2Q
810
45.9
531
279
34.4
49
81
13
162
0
0.0
162
50.1
20.0
3Q
728
12.3
462
266
36.6
50
50
9
175
54
30.9
121
-43.9
16.6
Source: MOSL, Company
Aliasgar Shakir - Research analyst
(Aliasgar.Shakir@motilaloswal.com); +91 22 3982 5423
Hafeez Patel - Research analyst
Hafeez.Patel@motilaloswal.com); +91 22 3010 2611
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Music Broadcast
Earnings call Highlights
1QFY18 Performance
Radio City is the no. 1 station in India with 52.5m ad volume in 23 cities.
Mumbai and Bangalore remain the no 1 stations.
Radio City witnessed 2% increase in volume share in the top 15 markets, where
data is publicly available.
EBITDA stood at INR22.2cr v/s INR19.1cr, +16% YoY; 31.5% margin, +100bp YoY.
RERA has impacted real estate’s revenue contribution from 9% to 6%. GST has
also impacted a few sectors.
Electronic, media sector revenues have outperformed other sectors in 1QFY18.
Current pricing at INR150-500/10 sec in new stations, which is at the average ad
rates in the respective markets. In the top stations, Radio City’s pricing hovers at
INR700-1200/10 sec in the top station and INR500-700/10 sec in the mid-tier
stations.
Employee cost cycle is April, while disbursements happen in May. However,
increments are accounted in each quarter and thus it doesn’t witness the big
quarterly jump on QoQ.
The increase in other expenses on YoY basis is due to new stations.
Station-wise performance and outlook
Operating at 70-80% capacity utilization in 28 stations. The company has taken
price hike in 12 out of 28 legacy stations. In the balance markets, there is
enough inventory available to drive volume growth.
In the top 14 markets, two third of growth will come from the price increase of
6-8%, whereas one-third of revenues growth will come from volume.
About 50% of revenue growth in 1QFY18 has come from legacy stations and
50% from the new market.
5 out of 11 new stations are running at a faster breakeven pace. So we think the
breakeven will happen in 18 months v/s earlier expectation of 24-30 months.
Management has taken rate hikes of 6-8% in top 12 stations and volume growth
in the remaining 16 legacy stations.
Average capacity utilization at 15-18% in the new stations. In 5 out of 11
stations, already at 25-30% capacity utilizations.
Management philosophy of rate hike is once the inventory reaches 60%; until
then, growth is driven by volumes. In 12 out of 39 stations, it has reached 60%
capacity utilizations, and thus taking 6-8% rate hike. Four years back, it had only
4 markets, which gradually moved to 6 and 8 in subsequent years.
New stations were launched from Oct’16 to March’17, so management
expectation of 18 months breakeven is from the time of each station launch.
Management is not witnessing any specific station as a laggard, but some
stations are delivering better results.
In the 11 new markets, Radio City has not entered by undercutting ad prices, but
by offering at average price prevailing in the market.
1 August 2017
2

Music Broadcast
Industry Landscape
The trend of multiple frequencies getting higher share is not visible after the
launch of new stations in top 23 large cities, including Bangalore, but only in
Mumbai.
Unlike other mediums, advertisers see longer trends in listenership in radio
market compared to the weekly and monthly data tracked in other markets.
Thus, multiple frequencies higher share has to be followed for a longer period to
validate the trend.
Activation is single digit EBITDA margin business, which doesn’t make a
compelling business proposition.
Government revenue in the industry has de-grown by 40%, but for Radio City,
government revenue has de-grown by 15% YoY.
Government revenue has high debtor days, but remains the safest.
Business Outlook
Management has earlier guided margin decline in FY18 due to the
commencement of new stations. But higher margin in 1QFY18 have surprised,
due to faster-than-anticipated ramp-up and breakeven in new stations.
The company has already reached target capacity utilization of 25-35% in FY18
for the new stations. This should allow breakeven in 18 months for the time of
launch v/s earlier expectation of 24-30 months.
The key driver of Radio City’s profitable growth is geographical expansion
instead of multiple frequencies in existing stations.
The high growth is not due to inventory reduction by peers, as Radio City has
continuously grown volume market share in the last 6 years.
Radio City’s 70% capacity utilization is not at peak which gives room for growth.
The strategy is to reduce the variance of peak advertising periods which goes
higher than the 15min threshold.
The company is not increasing credit periods to drive growth. The high debtor
days of 110 days in 4QFY17 are driven by high government ads.
Radio City’s higher revenue growth is due to lowest ad cost/thousand reach due
to its high listenership share.
From the last week of July, company has seen uptick in ad demand due to the
early festive season.
Despite the GST price pass on, Radio City has been successful in taking price
increase.
Radio City does not reverse rate hikes.
Organizing regional cine awards in Tamil. Completed tie ups with local
advertisers. Voting and awards will be only on Radio. It will be expanded to all
radio markets. Starting with Tamil as it remains among the top movie market.
Radio City’s strategy is to be among the top 2 in each of the market, as the No 1
or 2 station in any city gets about 20% premium v/s the average in the market.
Digital foray
Radio City started its digital foray in 2008. The recent launch of Radiocity.in will
allow the company to take its marquee radio properties to the digital platform.
1 August 2017
3

Music Broadcast
Radio City has also tied up with Apple to provide curated content for ITunes,
highlighting its strong brand proposition.
Radio City’s listenership data shows improvement, but industry data for overall
listenership is not available to explain growth of radio listenership. However,
this can be validated by new marketing/launches of each station, which is
improving listeners. Plus, management is witnessing expanding ad budgets by
retail sectors.
Saavn will break even this year. But media consumption is one-third of the
global market which is growing. So digital has added to the ad market, but not
cannibalized the market. Radio’s time spend has increased from 37 to 45min/hr.
Acquisition, balance sheet insights
The company remains on the lookout for margin-accretive acquisition
opportunities. In any future growth acquisition strategy, it will maintain the
prudence shown in the existing stations.
From FY18, the company expects to start dividend distribution.
Radio City is already in talks of acquisition with few players. The key strategy is
to improve geographic reach or fill some imp cities. Priority is to have EPS
accretive investment and improve reach and ad cost/thousand for the
advertisers.
Acquisition priority is to fill gap stations and increase reach compared to adding
multiple frequencies.
1 August 2017
4

Music Broadcast
Story in charts
Exhibit 1: Revenue & EBITDA margin trend
Revenue
EBITDA margin (%)
Exhibit 2: Revenue & EBITDA margin to increase steadily
over FY17-20E
Revenues (INR m)
31%
35%
EBITDA Margins (%)
34%
33%
36%
38%
21%
25%
27%
Source: MOSL, Company
Source: MOSL, Company
Exhibit 3: Revenue growth accelerated by new stations
Phase II - 28 stations
Phase III Batch 1 - 11 stations
304
434
Exhibit 4: EBITDA mix from new stations to improve
Phase II - 28 stations
Phase III Batch 1 - 11 stations
1
-
1,147
623
782
996
(84)
FY15
FY16
FY17
(109)
FY18E
FY19E
FY20E
1,295
1,454
110
-
-
31
182
2,008
FY15
2,255
FY16
2,683
FY17
2,990
FY18E
3,307
FY19E
3,648
FY20E
Source: MOSL, Company
Source: MOSL, Company
Exhibit 5: Future growth focused around utilization levels of Phase III stations
Legacy Stations
Number of stations
Average Utilization
Annualized Average Utilization
Top 4
Average Realization Levels
(INR/10 sec)
Growth Strategy
500-1200
28
65-75%
65-75%
Next 6
150-300
Phase III
stations
11
6%
20-30%
Balance
75-100
75-85
Improving
Utilization
levels
Top 4
500-1200
Total Stations
39
50-60%
60-70%
Next 6
150-300
Balance
75-100
Improving ER and Utilization levels
Improving ER, Better Utilization levels
Source: MOSL, Company
1 August 2017
5

Music Broadcast
Exhibit 6: Ad rates and volumes both increasing steadily
Air time sold (hrs in 000's)
188
197
212
223
230
Ad Rates (INR)
224
34.0
229
35.8
235
37.6
42%
45%
48%
58%
45%
52%
62%
69%
Exhibit 7: Overall capacity utilization levels to increase
77%
178
19.1
20.4
21.8
26.3
28.1
31.8
Source: MOSL, Company
Source: MOSL, Company
Exhibit 8: FCF and Net Debt to equity trend
6.5
189
318
326
-4.8
-7.0
FCF (INR m)
4.0
623
-2,198
Net Debt to equity
2.2
310
763
1,022
-0.5
-0.5
916
Exhibit 9: FCF growing as new stations become operational
FCF (INR m)
318
68%
326
3%
623
91%
-114%
(2,198)
-453%
310
FCF growth
1,022
230%
-25%
20%
763
916
-0.4 -0.4
Source: MOSL, Company
Source: MOSL, Company
Exhibit 10: Return ratios to improve from FY18
138.0%
23.3%
21.8%
13.2%
13.1%
44.3%
FY15
FY16
11.2%
FY17
9.3%
FY18E
13.3%
8.8%
ROE
ROCE
ROIC
20.0%
14.0%
9.4%
12.3%
12.4%
FY19E
13.8%
13.8%
FY20E
26.1%
Source: Company, MOSL
Exhibit 11: Valuation summary
EBITDA
Less Net debt
Total Value
Shares o/s (m)
CMP (INR)
Upside (%)
Methodology
FY19 EV/EBITDA
Driver (INR m)
1,296
Multiple
18
Fair Value (INRm)
23,330
-3,431
26,761
57.1
Value/sh (INR)
409
-60
469
359
31
Source: MOSL, Company
1 August 2017
6

Music Broadcast
Financials and Valuations
Standalone - Income Statement
Y/E March
Total Income from Operations
Change (%)
License Fees & Programming Costs
Employees Cost
Mrktg & Advert. Expenses
Admin & Other Expenses
Total Expenditure
% of Sales
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY13
1,381
13.0
129
346
245
322
1,042
75.5
339
24.5
199
140
48
24
116
0
116
0
0.0
116
116
-795.7
8.4
FY14
1,542
11.7
128
363
246
381
1,118
72.5
424
27.5
155
269
57
31
243
0
243
0
0.0
243
243
109.4
15.8
FY15
2,008
30.3
145
430
301
509
1,385
69.0
623
31.0
157
466
62
67
471
0
471
0
0.0
471
471
93.5
23.4
FY16
2,255
12.3
230
511
206
526
1,473
65.3
782
34.7
167
614
207
148
555
-136
420
143
34.2
276
366
-22.3
16.2
FY17
2,714
20.4
300
651
240
611
1,802
66.4
913
33.6
197
716
190
44
570
0
570
203
35.7
367
367
0.3
13.5
FY18E
3,172
16.9
313
786
308
728
2,135
67.3
1,037
32.7
257
780
157
191
813
0
813
281
34.6
532
532
45.0
16.8
(INR Million)
FY19E
3,611
13.9
335
865
328
787
2,315
64.1
1,296
35.9
240
1,056
30
194
1,220
0
1,220
422
34.6
798
798
50.1
22.1
FY20E
4,082
13.0
360
952
355
852
2,519
61.7
1,564
38.3
243
1,321
0
220
1,541
0
1,541
533
34.6
1,008
1,008
26.3
24.7
Standalone - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Appl. of Funds
FY13
389
-526
-137
1,486
0
1,349
2,130
1,708
422
13
0
1,273
645
220
407
359
292
44
23
913
1,349
FY14
389
-283
106
1,282
0
1,388
2,166
1,850
317
3
0
1,380
628
339
413
311
231
55
26
1,069
1,388
FY15
389
187
576
2,932
0
3,507
2,189
2,002
187
3
0
3,787
772
543
2,472
470
339
94
36
3,317
3,507
FY16
389
685
1,074
3,057
0
4,131
3,527
1,223
2,304
657
142
1,751
950
158
643
722
393
276
53
1,029
4,131
FY17
571
4,911
5,481
1,499
-270
6,710
4,536
1,420
3,116
0
268
3,958
817
2,679
462
631
329
234
69
3,327
6,710
FY18E
571
5,442
6,013
499
0
6,512
4,594
1,677
2,917
0
268
4,073
956
2,735
383
746
521
179
45
3,327
6,512
(INR Million)
FY19E
571
6,240
6,811
-1
0
6,810
4,653
1,917
2,735
0
268
4,649
1,088
3,162
398
842
594
198
50
3,807
6,810
FY20E
571
7,248
7,818
-1
0
7,817
4,711
2,160
2,551
0
268
5,944
1,230
4,298
415
945
671
219
55
4,999
7,817
1 August 2017
7

Music Broadcast
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
FCF per share
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Asset Turnover (x)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Net Debt/Equity
FY13
2.0
5.5
-2.4
0.0
0.0
FY14
4.3
7.0
1.9
0.0
0.0
FY15
8.2
11.0
10.1
0.0
0.0
FY16
6.4
9.3
18.8
0.0
0.0
56.3
38.7
19.2
10.4
30.1
0.0
-38.5
-57.5
11.7
11.5
1.0
171
77
-9.2
-1,580.1
21.9
24.9
1.1
149
55
8.9
138.0
21.8
23.3
0.6
140
62
4.1
44.3
13.1
13.2
0.5
154
64
2.6
FY17
6.4
9.9
96.1
0.0
0.0
56.2
36.6
3.8
7.2
21.3
0.0
5.4
11.2
8.8
13.3
0.4
110
44
-0.3
FY18E
9.3
13.8
105.4
0.0
0.0
38.7
26.1
3.4
5.8
17.7
0.0
17.9
9.3
9.4
14.0
0.5
110
60
-0.4
FY19E
14.0
18.2
119.4
0.0
0.0
25.8
19.8
3.0
4.8
13.4
0.0
13.4
12.4
12.3
20.0
0.5
110
60
-0.5
FY20E
17.7
21.9
137.0
0.0
0.0
20.4
16.5
2.6
4.0
10.4
0.0
16.1
13.8
13.8
26.1
0.5
110
60
-0.6
Standalone - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY13
116
199
48
-17
0
346
-3
343
-25
318
0
96
71
24
-243
-52
0
0
-271
143
78
220
FY14
243
155
57
-4
-77
373
-9
364
-37
327
0
139
101
0
-203
-56
0
0
-259
206
133
339
FY15
471
157
62
7
-54
643
7
650
-27
623
0
-1,871
-1,898
0
1,649
-51
0
0
1,599
351
192
544
FY16
561
167
190
-106
113
925
-262
663
-2,861
-2,198
-134
2,338
-656
0
-88
-192
0
0
-281
-274
432
158
FY17
570
197
190
-203
223
977
-314
662
-352
310
-126
44
-433
4,041
-1,558
-190
0
0
2,292
2,521
158
2,679
FY18E
813
257
157
-281
55
1,002
79
1,081
-59
1,022
0
191
132
0
-1,000
-157
0
0
-1,157
56
2,679
2,735
(INR Million)
FY19E
1,220
240
30
-422
-52
1,016
-194
822
-59
763
0
194
136
0
-500
-30
0
0
-530
427
2,735
3,162
FY20E
1,541
243
0
-533
-56
1,194
-220
975
-59
916
0
220
161
0
0
0
0
0
0
1,136
3,162
4,298
1 August 2017
8

Music Broadcast
NOTES
1 August 2017
9

Disclosures:
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
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Music Broadcast
Disclosure of Interest Statement
Analyst ownership of the stock
Music Broadcast Ltd
No
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without any prior approval. MOSL, its associates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities
mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities
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Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com. Correspondence Address: Palm Spring
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Contact No.:022-30801085.
Registration details of group entities.: MOSL: NSE (Cash): INB231041238; NSE (F&O): INF231041238; NSE (CD): INE231041238; BSE (Cash): INB011041257; BSE(F&O): INF011041257; BSE(CD); MSE(Cash): INB261041231;
MSE(F&O): INF261041231; MSE(CD): INE261041231; CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412. AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset
Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth
management solutions. *Motilal Oswal Securities Ltd. is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. * Motilal Oswal Commodities Broker Pvt. Ltd. offers Commodities
Products. * Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products
1 August 2017
10