
Open Question to fellow investors tracking Music Industry.
A business like Universal which controls more than 1/3rd of all published music globally is selling for less than 6x FY20 Sales.
Why are Indian businesses like Saregama / Tips selling for 11x, 20x their sales?
FY 20 Revenues ~ 8.87 B USD or 7.4B EUR
Catalogue of Music includes every international artist you can possibly name
Either Universal is grossly undervalued or Saregama/Tips are grossly overvalued.
Homework for all the interested participants here:
— Intrinsic Compounding (@soicfinance) June 27, 2021
Q1.Why 20% and not 50%+ Margins for UMG
Q2. Differences in dynamics between Western&Indian cos?
Q3. Trends in West vs Trends in India in the industry.
Research and find the answers. My job is done \U0001f601\U0001f64f
If you see the ebitda of universal music its low 20% compared to our saregama 30% or tips 50%. So when you compare earnings saregama is 40x and tips is 30x and universal music is 30x. Also these type of companies are less( low or no capex with excellent and growinh cashflows)
— Srikanth V (@mynameisnani75) June 27, 2021
The rights are different here in India.
— Saket Reddy (@saketreddy) June 27, 2021
Indian labels own both publishing and master rights unlike the global peers.
Hence the 80% EBITDA Margins vs 20% EBITDA Margins for UMG.
Comparing them isn't useful IMO but should be only referred to study the Industry structure.
1. You own both the recording and publishing rights in India
— Saket Mehrotra \U0001f60e\u2615\U0001f4b0 (@mehrotra_saket) June 27, 2021
2. Streaming business in India is 85% of the industry compared to 52% globally
3. You should look at FY21 number for Tips as that is pure-play music streaming
4. Headroom in India builds optional value for paid converts https://t.co/mOBj83uZgH
All throughout the world, largecaps sell at lower valuations than smallcaps. Larger room for growth. + India growth narrative. + More rights with labels in India. + The whole bollywood industry means that imo moat is wider in india for indian labels than at global stage for umg
— Sahil Sharma (@sahil_vi) June 27, 2021
I think valuations based on sales is suitable only when the current profitability does not reflect the true profitability of the business. In the end valuations are based on profits
— Ankush Agrawal (@Ankush__Agrawal) June 28, 2021
UMG and Tips have very different margins and thus comparison based on sales is not a great way 1/2
Why do you think Bill Ackman is pouring in 28000 crore in Universal? He clearly believes that even at 25x EV/EBITDA, it is CHEAP.
— Neil Bahal (@NeilBahal) June 27, 2021
Universal has 20% ebitda margin. Tips has 60% net profit margin :) :) pic.twitter.com/6y8mEoLAU6
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