Zee Entertainment Enterprises Ltd. share price target

Reiterate Neutral with TP of Rs 618 @ 32x Dec19E EPS. Zee Entertainment (Zee) reported revenue growth of 23% YoY (like-to-like) led by healthy advertising revenues (+28%). Subscription revenue growth was muted at 7.5% YoY. EBITDA grew by 17% YoY owing to higher opex on 25 years completion celebration and brand refresh. Zee is trading at 34/30x FY19/20E EPS. Valuations are rich but tenable given Zees focused strategy, superior execution, constant investments and profitable growth.

Ex-sports revenue rebounded (+23% YoY) to INR18.4b on a low base (3QFY17 was impacted by demonetization). Consolidated revenue grew 12% YoY (7.6% beat). EBITDA expanded 15% YoY to INR5.9b (8% beat). Ex-sports EBITDA increased 17% YoY ??? lower than revenue growth due to higher SG&A related to a) an increase in original number of hours of content, b) three movie releases and c) INR400m of one-off expense related to Zee???s 25-year branding. EBITDA margin improved 90bp YoY to 32.3% (in-line). PAT rose 29% YoY to INR3.2b. Investment in secured NCD of INR1.67b is overdue, while Zee is pursuing recovery options.

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Recovery in the ad market coupled with Zee TV's improved BARC rating in Hindi GEC and focus on regional channel bouquet should help the company to garner higher than industry ad revenue growth. We expect subscription revenue to grow in mid-teens in FY19/20 -on theback of gains from digitization and monetization of DAS III/IV markets. TRAI order should consolidate the market towards top broadcasters. We expect overall investments of INR7b towards movie/music rights acquisition and movie production in FY18. RoCE should recover from FY19,driving healthy FCF. We believe a secular 16 % EPS CAGR over FY17-20 should support the premium valuations. We maintain Buy,with a revised target price of INR690(35x December 2019E EPS of INR19.8

ZEELs Q2 domestic ad revenue grew ~6%, despite GST-led sluggish growth in July (vs. our/ cons. est of 2-4% growth), as ad spends across most of the key sectors like FMCG and E-commerce revived.

Zee Entertainment Enterprises Ltd.'s posted better-than-estimated quarterly earnings driven by an exceptional gain on sale of its sports broadcast business. The consolidated operating revenues for September 2017 quarter de-grew by 7% to Rs 1582.05 crore. International business revenue stood at Rs 171.5 crore. The advertising revenues grew by 3% to Rs 986.74 crore. The subscription revenues de-grew by 14% to Rs 501.41 crore. OPM has inclined by 219 bps to 31%. The resultant PBT and EO has increased by...

Zee Entertainment Enterprises Ltd.'s Q2FY18 result was a mixed bag. The company reported 6.7% YoY de-growth in sales as subscription revenue declined for second consecutive quarter. EBITDA increased by 17.2% YoY on account of lower operating cost while sharp surge in other income and exceptional gain due to closure of second phase of transaction of sale of sports business to Sony Pictures boosted PAT growth at 147.8% YoY.

Furthermore, market share will receive a traction from higher spends coming on the movie basket (mainly Hindi and Marathi) by Zee. Additionally Zee's acquisition of the 9X music channels will consolidate from Q4 and add incremental revenues to the ad...

Zee is trading at 31/27x FY19/20E EPS. Valuations are rich but sustainable given Zee's focused strategy, superior execution, constant investments and profitable growth. BUY with TP of Rs 575 @ 32x Sep19E EPS. Zee Entertainment (Zee), a leading player in the Indian entertainment space reported modest operating performance owing to GST headwind. Like-to-like revenue grew by 6.6% YoY to Rs 15.8bn (excluding hived off sports business in 4QFY17); EBITDA declined by 3% to Rs 4.9bn.