Tips Industries shares have surged up over 120% in the last year, but analysts at Ventura think the stock still has some steam left.

The Tips Industries Analyst: Analysts at Ventura initiated coverage on the stock with a “buy” rating and a price target of ₹612 over the next two years. This indicates a 60% upside from the stock’s current market price of around ₹380.

The Tips Industries Thesis: In its research note, the brokerage said that Tips Industries is positioned as a strategic player with a comprehensive approach to content creation, leveraging an extensive library of 30,000 songs and a substantial subscriber base of 63.1 million, surpassing competitors like Saregama with 1,50,000+ songs and a subscriber base of 38.9 million.

The analyst also highlighted the company’s commitment to innovation as it is allocating 30% of revenue to new content investments. Notably, Tips Films, a part of TIL, plans to release 10-12 movies annually, featuring songs for sale to TIL. This integrated approach maximizes monetization opportunities and emphasizes TIL’s dedication to content-driven revenue streams.

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In 2022, the Indian music industry witnessed a noteworthy 19% growth, reaching a valuation of ₹22 billion. The music streaming sector amassed an audience of approximately 208 million, with paid subscribers constituting a modest 2.4%, numbering around 4-5 million. The trend toward subscription-based models is becoming more pronounced among streaming platforms. For example, Spotify boasts a 40% premium subscriber base, contributing a substantial 90% to its revenue, in contrast to the 10% contributed by the 60% of free subscribers. This shift toward premium subscriptions implies that music labels, like TIL, have the potential to significantly augment their earnings beyond the customary ₹0.1 per stream.

The growth outlook for the music major is optimistic, as the brokerage expects revenues to grow at a compound annual growth rate (CAGR) of 27.4% to ₹386 crore. EBITDA is projected to grow at a CAGR of 35.6% to ₹256 crore, with 66.3% margins (+1,170bps) by FY26. Net earnings are anticipated to grow from ₹76.5 crore in FY23 to ₹196.5 crore (CAGR of 37%), with 50.9% margins (+990bps).

Price Action: Tips Industries’ share price was down 1.76% to trade at ₹384.95 in early trade on Monday.

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