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Hidden Gems Saregama India - Proxy play on thriving music industry

ICICIdirect Research 06 Dec 2024 DISCLAIMER

Saregama India (Saregama) is India’s oldest music label owned by RPSG Group with ~1.6+ lacs songs, which is monetized over various formats such as digitals (streaming, YouTube), physical (Carvaan) and television

Strong medium-term outlook in Music Segment: The management has guided for ~30% revenue growth (excluding Carvaan) over the next 3-4 years, with licensing revenue (B2B) growth at 23% CAGR, led by higher share in new content across Hindi and regional languages. We estimate ~21% CAGR in B2B (licensing) music sales in FY24- 27E to ₹ 939 crore, as monetisation of existing IPs via digital platforms and new music acquisition will drive growth
Profitability growth to be back ended: The management highlighted that growth may be slower for next 4-6 quarters as it ramps up content acquisition. Nonetheless, it expects the profitability CAGR to outpace the topline growth thereafter. After muted FY25, we expect reported EBITDA margins to bounce to 31.5% by FY27 vs. 30.7% in FY24, resulting in 23% earnings CAGR over FY24-27E.

We have a positive view on Saregama India as we expect digital monetisation to provide sustained growth momentum. We assign a BUY rating, valuing it at a target price of ₹ 610, with a multiple of 36x P/E on average of FY26E & FY27E EPS

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