Zee Entertainment Enterprises Ltd. share price target

Ad witnesses impact of conversion of FTA to pay channel During Q1FY20, Zee, along with other key broadcasters, converted its FTA channels into pay. This resulted in 5-6% loss in ad revenues. Furthermore, the company also attributed the weak domestic ad growth to shifting of ad spends due to the cricket world cup. The company expects ad growth revival from H2FY19 driven by festivities. However, we note that the management reiterated its guidance of beating the expected industry ad growth of high single digit to low double digit in FY20. We bake in 11.4% CAGR in ad...

The robust subscription revenue growth of 36.6% YoY is the key highlight of Zee's healthy Q1FY20. Ad revenue growth was a marginal 3.6%, due to FTA channels becoming pay and NTO. Zee's struggle and ambiguity due to promoter stake sale to bail out the Essel group since the past 6-8...

revenue increased 13% YoY to INR20.1b on account of strong 47% domestic subscription growth, partly offset by subdued 4% domestic ad revenue growth. While the implementation of NTO improved channel pricing and supported subscription growth, it also hurt ad growth due to weak viewership and the conversion of FTA channels into pay channels. Nevertheless, EBITDA grew 17% YoY, led by a 100bp margin improvement to 32.9%. Adjusting for the fair value gain, PAT was up 33% YoY to INR4.6b (13% beat). (a) Domestic subscriber revenue is likely to grow by mid- 20% in FY20. (b) Ad growth was soft, but is likely to revive in 2H. The upward reset in subscription revenue due to better channel pricing in NTO is likely to drive healthy 26% subscription growth in FY20. Our channel checks indicate that the ad market remains weak but should revive from the festive season. Revenue/PAT CAGR is estimated at 14/16% over FY19- 21.

Robust ad growth, guides for industry leading growth in FY20 Overall ad growth of 16% was driven by 17.7% growth in domestic advertisement, which was pleasantly surprising considering the NTO led disruptions during the quarter. International ad revenues, however, declined 9.6% YoY to | 60 crore. We note that the management reiterated its guidance of beating the expected industry ad growth of low double digit in FY20. However, it could be challenging amid the transitory NTO led disruption and soft commentary of consumer companies. We build in 13%...

We highlight that Zee's premium valuation has been driven by industry leading ad and subscription growth a function of viewership market share expansion, which currently is clouded by NTO led disruption. We also believe that NTO implementation, apart from providing consumers a choice, has led to higher power in DPO's hands in bundling channels. Zee's absence in base bouquet could be detrimental. Consequent, to revenue estimates, we revise our FY20 earnings downwards by 10.7%. Therefore, we downgrade the stock to HOLD. We introduce FY21 estimates and roll over...

Zee Entertainment (Zee), along with other group companies, witnessed a sharp correction (~27%) in their share price after an article (link) by the media group The Wire alleged that Essel Group were linked to an entity named Nityank Infra that is being investigated by Serious Fraud Investigation Office (SFIO) for deposits of | 3000 crore during demonetisation. With further concerns over group level debt and pledged shares, the shares fell sharply. Through a conference call and stock exchange announcement (link), the company has categorically denied any...

The consolidated revenue grew by 17.9 percent on year-on-year (YoY) basis at Rs 2,166.77 crore, driven by ad revenue and subscription revenue growth. Consolidated ad revenue grew by 21.7 percent at Rs 1,462.6 crore and subscription revenue grew by 23.3 percent at Rs 618.5 crore. Strong traction in domestic ad revenues and subscription revenue growth supported...

At 27/24x FY19/20E EPS, Zee's valuations look reasonable given its superior growth and execution. Reiterate BUY with TP of Rs 512 @ 25x Dec-20E EPS. Zee delivered yet another strong quarter on all the operating parameters viz. ad, subscription and margins. This is despite ongoing investments in digital (ZEE5). In 3QFY19, revenue/EBITDA/APAT grew by 18/27/44% YoY. Even in 9MFY19, revenue/EBITDA/APAT grew by healthy 19/27/31%.

ICICI Securities Ltd | Retail Equity Research The key highlight for Zee Entertainment's (Zee) Q3FY19 performance was the strong performance on the domestic subscription front (~28.6% YoY growth vs. estimate of ~18%) and domestic advertisement growth of ~20.6% YoY (even on a high base of 30.2% growth in Q3FY18). International ad grew ~40% YoY. We note that while subscription revenues were led by catch up revenues from deal closures and better monetisation of phase III markets, the domestic ad...

revenue grew 18% YoY to INR21.7b (in-line), driven by robust ad/subscription growth. Domestic ad revenue increased 21% YoY, led by contribution from ZEE5 and a higher network viewership share. Domestic subscription revenue grew 29% YoY, led by a favorable base and monetization of phase-III subscribers. EBITDA, thus, grew 27% YoY to INR7.5b (5% beat), with the margin expanding 250bp YoY to 34.8%. This, coupled with higher other income and fair value gains, led to PAT growth of 50% YoY to INR5.6b (+26% YoY adjusted for fair value gains). (1) ZEE expects to deliver better-than-TV industry ad revenue growth and low-teens subscription revenue growth in FY20. (2) FY20 margins are guided at 30%+, despite investments in ZEE5. (3) The company is confident of announcing the buyer for promoter stake by Mar/Apr19 (as guided earlier).