Recommendation From Telecommunications - Service Sector

This section gives a recommendation of a stock having stock price below Rs 100 with sound fundamentals and expected to give handsome returns over a one-year time horizon.

ONMOBILE GLOBAL : ENTERTAINING ON A PROFITABLE NOTE

HERE IS WHY
✓Good financial improvement
✓Good growth prospects
✓Focus on cost reduction

OnMobile Global Limited is engaged in the business of mobile entertainment. Headquartered in Bangalore and with offices across the globe, OnMobile Global offers a wide array of products such as videos, tones, games and contests. It has an addressable base of more than 1.68 billion mobile users and over 100 million active subscribers across several geographies based on current deployments. The company is a global leader in supplying ring-back tones. OnMobile Global is India’s largest white-labelled value-added services (VAS) company for mobile and media service providers. The company reported net sales of Rs 551.29 crore in FY21. It had reported net sales of Rs 572.42 crore in FY20, a decrease of 3.69 per cent.

It reported PBIDT of Rs 65.94 crore in FY21, an increase of 73.12 per cent. It had reported PBIDT of Rs 38.09 crore in FY20. The company reported PAT of Rs 46.55 crore in FY21, an increase of 68.78 per cent. It had reported PAT of Rs 27.58 crore in FY20. The company has reported cash from operating activities of Rs 39.41 crore in FY21 as against Rs 17.16 crore it reported in FY20. Its net sales were at Rs 130.70 crore in March 2021, down by 10.49 per cent from Rs 146.02 crore in March 2020. Its PBIDT was Rs 14.96 crore in March 2021, up 28.19 per cent from Rs 11.67 crore in March 2020. Cost rationalisation efforts and optimum marketing investments helped the company to reduce manpower cost and marketing expenses which resulted in the growth of its PBIDT.

Its quarterly net profit was Rs 14.70 crore in March 2021 as against net profit of Rs 17.88 crore in March 2020, an increase of 17.79 per cent. With efforts invested in cost optimization, its profitability margins grew more than 1.5 times this year. OnMobile Global has launched a new B2B gaming product, Challenges Arena, a single destination of casual challenges that provides an unparalleled gaming experience. The company is set to expand its service offerings beyond telecom users by enabling the reach of premium mobile entertainment services to OEMs and mobile wallet operators.

Infrastructure improvements, data affordability, better quality of content, speed of streaming and downloading is amplifying digital growth and there is an increase in content aggregation. The company with its new suite of digital services and products aggregated at a single destination is ready to address the market demand. The company has started to work actively with non-operators in providing product and content services like contests, games and videos. As a global leader in mobile entertainment, it is expanding its suite of digital services and expects to gain even greater traction with operators and enterprises offering additional value-added services.

Its expansion into offering services with additional revenue models like advertising-funded and freemium – a business model, especially on the internet, whereby basic services are provided free of charge while more advanced features must be paid for – will enable it to expand its customer base in the coming year. Mobile gaming is forecasted to be the fastest-growing segment within the gaming industry and more so in India, one of the key markets for OnMobile Global. The company has reduced its debt and is now almost debt-free. It has delivered good profit growth of 24.46 per cent CAGR over the last five years. By virtue of these factors, we recommend our reader-investors to BUY this stock.