Prabhudas Lilladher's research report on Zee Entertainment Enterprises
We cut our EPS estimates by ~21% odd over FY24E/FY25E as 1) widening losses in ZEE5 (EBITDA loss has increased from Rs7,534mn in FY22 to Rs11,050mn in FY23) 2) entry into sports (impact visible this quarter given conclusion of ILT20) and 3) sluggish recovery in ad-environment is likely to dent profitability in near term. Zee Entertainment Enterprise’s (Z IN) operational performance was broadly in-line with EBITDA margin of 7.2% (PLe of 7.9%) but PAT was derailed by an exceptional charge of Rs2,131mn. In light of the ongoing challenges, we cut our target multiple to 19x (earlier 21x) and roll-forward our valuation to FY25E as NCLT has directed exchanges to re-examine approvals granted earlier and issue an NOC which can cause some delay in merger time-lines.
Outlook
We expect sales CAGR of 9% over next 2 years with EBITDA margin of 15.4%/18.5% in FY24E/FY25E and retain BUY with a revised TP of Rs240 (earlier Rs277). Delay in merger and slower recovery in ad-environment can act as a key overhang in near term.
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