Sharekhan's research report on Zee Entertainment Enterprises
ZEEL reported revenue at Rs 2,112.1 crore, flat q-o-q / down 9.1% y-o-y which beat our estimates of Rs 2,017 crore owing to a 5.5% y-o-y decline in advertisement revenue and a 25.6% y-o-y decline in Other Sales and services. EBITDA margins declined by 1377 bps y-o-y to 7.2%, below our expectation of 9.8%, owing to higher programming and operating costs. EBITDA margin was impacted by an increase in costs across Zee5, Movies and Sports. Zee5 continued to gain ground with revenue at Rs 220 crore, up 36% y-o-y. The management expressed expectations of a gradual recovery in ad spends and indicated cautious optimism regarding inflationary headwinds and the benefits of NTO 3.0.
Outlook
We maintain a Buy on ZEEL with revised PT of Rs. 210 given healthy traction in ZEE5, benefits of NTO 3.0 on subscription revenues and reasonable valuation. However, we have lowered the target price to factor the weak and volatile margin profile due to continued investment in content. At CMP, the stock trades at 18.1x /14.6x its FY24E/FY25E EPS.
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