Target: ₹580
CMP: ₹513.10
Saregama India’s strong headline numbers masked the weakness in music licensing revenue. Consolidated revenue grew 40.3 per cent yoy, aided by strong growth in the video segment. Music Licensing revenue growth was soft, up 8 per cent yoy in Q2, despite the impact of select platforms moving to a paid model now being completely factored in.
EBITDA margin of 25.2 per cent fell short of our estimate on account of higher growth in the lower-margin video segment and elevated content investments. Despite some softness, mgmt upheld its prior medium-term revenue and margin guidance. We believe pickup in Music Licensing revenue growth will be the key driver for stock performance – seasonality is biased toward H2, so a robust performance could cover the H1 weakness.
We cut FY25-27E EPS by 3-8 per cent building in the Q2 performance, slightly lower music segment growth for FY25, and the slower margin trajectory. We roll forward to Sep-26E, retaining Buy and DCF-based target price of ₹580 (implied FY26 PER of 41x)., carries a project execution risk with demand uncertainty.