This Small Cap Entertainment Sector Stock Grew 912.59% In 3 Yrs, Buy For 21% Upside: ICICI Direct

ICICI Direct upgrades its rating on Saregama India Limited from Hold to Buy with a revised target price of Rs 460 per share. With the given target price, the brokerage sees a potential upside of up to 21% from its current level in 12 months. Saregama is a small-cap entertainment sector company.

Saregama India (Saregama) is India's oldest music label with ~1.42 lakh songs across various languages, which is monetised over various formats such as digitals (streaming, YouTube), physical (Carvaan) and television. Apart from music, it is also into TV serials /(Tamil), creates low-budget films as well as web series for OTT platforms through Yoodlee Films and has an artists and events management business.

Stock outlook & Returns of Investment

The stock of the company last traded at Rs 382.10 per share on NSE. Shares have fallen 2.06% as compared to the previous close of Rs 390.15 per share. Its 52-week high level was recorded on 3 January 2022 at Rs 550.59 and the 52-week low level was recorded on 26 September 2022 at Rs 346.30, respectively. It has a market cap of Rs 7,367.25 crore.

The stock in the past 1 month has surged, giving a positive return of 4.16%, whereas, in the past 3 months it has fallen, giving a negative return of 8.5%. Over the past 1 year, it has given a negative return of 11.68%. However, on long-term investments of 3 and 5 years, it has given multibagger returns. In 3 years it gave 912.59% and in 5 years it gave 455.98%, respectively.

Q2FY23 Results

Saregama reported a healthy set of numbers. Revenues were up ~30% YoY, at Rs 189.2 crore. The TV & films segment, up 52.6% YoY at Rs 34.1 crore. Music segment was up ~24% YoY driven by Carvaan sales volumes, which were up ~51% YoY to 1.56 lakh units, while licencing revenues continued to be robust with ~20%+ growth. EBITDA grew 27.5% YoY to Rs 56.5 crore with EBITDA margin at 29.9%, down 68 bps YoY, owing to revenue mix. Consequent PAT was at Rs 46.1 crore (up 31.4% YoY). The company has changed the useful life of music rights, which aided the EBITDA by Rs 2.5 crore. Like-to-like PAT was at Rs 44.2 crore, up 26% YoY.

Buy for a target price of Rs 460/share

Saregama's share price has grown by ~5x over the past five years. "We expect digital monetisation to provide sustained growth momentum. Accelerated opportunity fructification in new areas like web series, artist management, etc, can provide further positive surprise. Post 27% decline in stock in CY22 YTD, we upgrade from HOLD to BUY. We value Saregama at revised target price Rs 460, at 32x FY25 P/E," the brokerage has said.

Key triggers for future price performance

Growth trajectory in music licencing, which management envisages to grow at ~22-25% in medium term, aided by new content monetisation. Recovery in Carvaan on the back of economic reopening and expansion in movies and web series segment.

Disclaimer

The stock has been picked from the brokerage report of ICICI Direct. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.