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Recovery likely to be gradual…

About the stock: Music Broadcast (MBL), a subsidiary of Jagran Prakashan, operates Radio City, which has 39 stations across 12 states, comprising 62% of the country’s FM population, reaching over 69 million listeners in 34 cities.

* MBL claims industry leadership with volume market share of 20% in Q2

Q2FY22 Results: MBL reported strong Q2FY22 results on a washout base.

* Revenues came in at | 40 crore, up 40% YoY, on a depressed base but still down 33% from pre-Covid levels. Topline growth was driven by ~42% YoY growth in volumes while yields were down YoY

* EBITDA was at ~| 4.6 crore with margins of 10.9% vs. loss in base quarter

* It reported a marginal profit of | 0.3 crore vs. loss of | 6.5 crore in Q2FY21

What should investors do? MBL’s share price has declined by ~58% over the past five years owing to a weak radio ad environment.

* We maintain HOLD on the stock as we expect realisations recovery to gradual. Also, the growth of online streaming medium remains a key risk

Target Price and Valuation: We value MBL at | 25 i.e. 20x FY23E P/E.

Key triggers for future price performance:

* Recovery in ad volumes, which is 10-15% below pre-Covid levels

* Recovery in ad realisations, which is still at 55-60% of pre-Covid levels

* Return of government ads, which have dried up post 2019

Alternate Stock Idea: Besides MBL, in our media coverage we like Inox.

* Play on multiplex earnings recovery post reopening

* BUY with a target price of | 495

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