Hold Saregama India Ltd For The Target Rs.489 - ICICI Direct
Stock turns ex-split…
About the stock: Saregama India (Saregama) is India’s oldest music label owning ~1.3 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) and creates low budget films as well as web series for OTT platforms through Yoodlee Films
Event: Stock Split
Saregama had fixed April 27, 2022 as the record date for stock split in the ratio of 1:10 i.e. one existing share of face value | 10 gets sub-divided into 10 shares of FV | 1 each. The ex-date for stock spilt is April 26, 2022
On the ex-date i.e. starting today (April 26, 2022), the stock price has adjusted for stock split ratio at ~| 450/share i.e. one-tenth the closing price on April 8, 2022 (| 4496/share)
What should investors do? Saregama’s share price has grown by ~17.8x over the past five years
We expect digital monetisation to provide sustained growth. Furthermore, recent demerger of non-core activity i.e. publication is a key positive with likely to drive a focussed approach of management on key business of music. We maintain HOLD rating on the stock
Target Price and Valuation: Keeping our estimates unchanged, we value Saregama at stock split adjusted target price of | 489, at 40x FY24 P/E.
Key triggers for future price performance:
Growth trajectory in music licencing, which management envisages to grow at 25-30%+ in medium term, along with new content performance
Recovery in Carvaan on the back of economic reopening
Expansion in movies and web series segment with new titles
Alternate Stock Idea: Besides Saregama, we like Inox Leisure in media coverage
Beneficiary of cinemas recovery & merger synergy
BUY with a target price of | 680
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