Broker’s call: Saregama (Buy)

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 y-o-y, aided by strong growth in the video segment. Music Licensing revenue growth was soft, up 8 per cent y-o-y 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.