ICICI Direct's research report on Zee Entertainment
Consolidated revenue came in at Rs 1772.3 crore, largely in line with our estimate of Rs 1780.1 crore. Domestic ad revenues grew 22.3% (vs. our expectation of 20% YoY growth) but international ad revenues stayed muted (2.1% YoY), lower than our expectation of 10% growth. This led to in line overall ad revenue growth of 18.5% YoY. On the subscription front, growth was disappointing at 8.3% YoY (vs. expectation of ~13% YoY), impacted by a decline in international subscription by 6.6% YoY while domestic subscription grew 12.3%RsEBITDA came in at Rs 565.7 crore, a tad above our expectation of Rs 560.7 crore, up 16.8% YoY. Consolidated EBITDA margins came in at 31.9% vs. our expectation of 31.5%. The EBITDA growth was owing to operating leverage and also supported by 3% QoQ decline in operational costRsReported PAT came in at Rs 339.4 crore (vs. expectation of Rs 349.4 crore) owing to higher-than-expected tax outgo, with tax rate of ~39% vs. expectation of ~35%.
Outlook
Zee Entertainment is poised to maintain its industry leading performance both in terms of ad growth as well as margins trajectory, given its strong bouquet of regional channels and prudent content spending. The digital expansion trajectory also remains on course, as per expectations, with limited margin erosion. The recent correction of over ~12% in the last three months has made the risk reward favourable amid its robust performance. We continue to value the company at 30x FY20E P/E to arrive at a target price of Rs 600. We upgrade the stock to BUY.
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Read More First Published on Jul 18, 2018 05:29 pm
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