Fair point @praky. Looking at the Q1 Inv PPT, we can clearly see a drop in content costs for FY24. On average it is ~25% of revenue over last 3 years. So, yes, we should expect a moderation in bottomline for FY25 as content acquisition picks up.
Importantly though, do you expect a moderation in revenue growth for FY25 as the content ages a bit and sustaining this level of 30+% revenue growth might be a challenge until new content acquisition resumes?
The movie arm of the business is Tips films. And there was 30 cr revenue from netflix from the movie plus some for the satellite rights and music. Net net it would be no profit no loss. I was previously tracking tips films
Well I will defer to management on that. I believe they have had the luxury to not acquire overpriced content because they saw they were growing still as per their targets of 30%. At some point that will wear off. Probably not for the next 3 quarters as the new revenue should kick in from the recent deal for YoY results.
However, i was more concerned about the margins and the bottomline. So far have stopped tracking the stock closely since it is compounding nicely without effort.
However, because of the elevated margins, I would like to see what kind of returns I should expect for the next year.
Saregama used to trade around 60 p/e with a worse business model (because of writeoff strategy and other lumpy businesses) when it was delivering 30% growth. So there is still some room here for peak valuations.
The company has brought in seasoned management. They have invested in software upgradation.
The company’s moat is a library of 30,000 songs, which will help them earn for the next 10 years. The major money-makers are 90s songs. The growth will continue to come from revised contracts/ new deals. 30% growth looks unsustainable beyond the next few years. Ultimately, they will converge to the industry growth rate of 14-15% plus or minus 2%.
With new management, I hope they are taking an analytical approach to content acquisition, making sound assumptions on music’s ability to earn Vs acquisition cost.
The company’s acquisition cash flow is quite less because they are bound by 30% topline and accruing everything in the same quarter. Whereas, Saregama is aggressive with cash outflow on acquisition. Being conservative, you can be picky on good music. Whereas, being aggressive can lead to a “spray and pray” approach.
I hope that the company should master their ability to forecast music success. I will be happy if they invest in AI/ ML technologies to do the same.
The other good thing I am hearing is comany’s focus on quality Vs quantity. You attract more audience with one superhit song Vs multiple flop ones. Also, superhits help you position your portfolio in front of the downstream players.
I am quite hopeful for aggressive growth in next 3 quarters due to Warner deal. What will be next year’s catalyst? That is the question. If they keep on finding these catalysts, the stock should do good.
