Zee Entertainment Enterprises Ltd. share price target

ICICI Securities Ltd | Retail Equity Research Revenues came in at | 1695.4 crore (vs. our estimate: | 1633.8 crore), growth of 22.4% YoY, led by robust subscription revenues, which grew 21.7% YoY to | 583.3 crore (vs. estimate of | 546.4 crore) driven by strong traction in domestic subscription (up 24.6% YoY) during the quarter. Advertising revenues at | 959.2 crore, up 13.7% YoY (15.7% YoY on restated Q2FY16 advertisement revenues as per IND AS), were in line with our estimate of | 957.4 crore. The...

movie production and India cricket series. Other expenses as a % of sales moved down to 16.8% (300 bps qoq and 480 bps yoy) on account of cost control and low carriage fees. Despite higher depreciation and lower other income, PAT adjusted for exceptional losses came in at 3.27 bn which was 17.3% higher yoy. Reported PAT was down 18.3% yoy at 2.44 bn....

intends to rev up its content pipeline by another 5-6 hours of original programming hours (OPH) per week in 2HFY17. It is also weeding out non-compelling content with limited viewership. Since Dec'16, the channel's OPH had declined from an...

Zee Entertainment has entered into a definitive agreement to sell its sports business held under the wholly owned subsidiaries viz. Taj TV and Taj Television India Pvt Ltd to Sony Networks India Pvt Ltd for an all-cash consideration of ~$385 million (~| 2600 crore). The deal entails a noncompete clause of four years. Zee expects deal closure in four to five months and does not expect any regulatory challenges on the same.

Valuation: ICICI Securities Limited value the extax deal proceeds at par without incorporating changes to the balance sheet.They continue to value the company at 32.0x P/E at an FY18E EPS of | 17.5 and separately value the cash inflow of | 2300 crore (ex-tax with tax assumed at 10.0% of the deal value) at par arriving at a revised target price of | 583. Post the recent run up in the stock price (~42% in the last six months), and assign a HOLD rating to the stock. They highlight that a favourable verdict in the litigation with BCCI in two ongoing cases, cumulating to | 270 crore, could additionally benefit Zee

Zee has shown superior ad?revenue growth over the last five quarters; it was +29% in FY16 vs. our estimate of an industry growth rate of 15?16%. This outperformance mainly came from market share gains in the regional space and the launch of its second Hindi GEC channel. Despite softness in FMCG ad spends (the sector contributes 50?55% of total TV ad revenues), we believe there are enough drivers for Zee’s ad revenue growth rate to be higher than the industry’s, including: (1) market?share gains in the Tamil GEC space, (2) monetisation of Zee Anmol (Zee’s Hindi GEC FTA channel), and (3) launch of a new/movie channel in the regional space. We estimate Zee’s ad revenue CAGR at 19% in FY16?18.

Valuation: Driven by consistent outperformance in ad revenue, Zee’s 12?month forward PE multiples have rerated to 36x vs. a five?year average of 26x.  We believe that the company will sustain premium valuation driven by – (1) industry?leading ad revenue growth, and (2) robust subscription revenue growth translating into an operating?margin expansion of 200bps over FY16?18. We maintain our BUY rating with an increased TP of Rs 590 (vs. the earlier TP of Rs 540), which is based on 35x FY18 EPS.

Zee is one of the largest & growing media business in India. Also, well positioned to capture higher market share, subscription & ad revenue given its versatility, DTH penetration and digitization.

Revenue growth of 17.3% YoY was led by robust advertisement revenues, which grew 19.0% YoY to | 911.9 crore (vs. estimate of | 902.6 crore). Subscription revenues were up 14.0% YoY with strong traction in international subscription. The beat in revenues can be attributed to other operating revenues, which came in at | 131.5 crore owing to outperformance of the movie Sairat vs. our estimate of other operating revenues of | 95.0 crore • EBITDA came in at | 453.2 crore vs. our expectation of | 386.7 crore benefiting from high operating leverage. The beat was due to relaxation on the content costs front. Zee also benefited from positive EBITDA in the sports business of | 17.1 crore. Consequently, EBITDA margins came in higher at 28.8%, up 512 bps YoY • PAT came in at | 217.0 crore (vs. expectation of | 302.9 crore) with Ind-AS resulting in a hit of | 113.2 crore passed through the P/L. The amount is mainly with respect to the change in fair value of preference share (now classified as debt) as well as change in fair value of investments and other financial instruments. ICICI Securities Limited value the company at 32x FY18E EPS of | 17.0, at a revised target price of | 545. They have a BUY rating on the stock.

Trendlyne has 10 reports on ZEEL updated in the last year from 4 brokers with an average target of Rs 519.8. Brokers have a rating for ZEEL with 1 upgrade,4 price upgrades in past 6 months and 6 price upgrades in past 1 Year.

1QFY17 operational performance above est.: ZEE's 1QFY17 EBITDA grew 44% YoY (6% above est.) to INR4.53b. The beat was led by higher-than-expected other sales and services; better sports biz performance and lower programming costs. On a like-to-like basis; PAT grew 22% YoY to INR2.17b (vs. est: INR3.19b). PAT miss was primarily led by loss booked in P&L on account of fair value accounting of ZEE’s preference shares and related spike in finance cost.Motilala Oswal maintain Buy rating with a revised target price of INR530 per share (earlier INR500) based on 28x average FY18 EPS plus INR18/sh toward &TV DCF value less INR18/sh toward pref. share liability.

Trendlyne has 10 reports on ZEEL updated in the last year from 4 brokers with an average target of Rs 519.8. Brokers have a rating for ZEEL with 1 upgrade,4 price upgrades in past 6 months and 6 price upgrades in past 1 Year.

Ad?revenue growth of ~19% yoy was ahead of our and consensus estimates. Industry? leading ad?revenue growth was driven by market share gain in regional markets   9 Subscription growth of 14% yoy was ahead of our estimates 9 Sports business reported EBITDA of Rs 171mn (we saw an EBITDA loss of Rs 200mn) 9 EBITDA margin was higher than estimated because of higher ad and other sales revenue 8 PAT growth was lower than EBITDA growth due to routing of MTM loss on investments and change in price of preference shares through P&L account (because of migration to Ind?AS accounting norms).Phillip Capital maintain BUY rating with a TP of Rs 540 (vs. earlier Rs 475) due to robust ad revenue continuing in FY17.

Trendlyne has 10 reports on ZEEL updated in the last year from 4 brokers with an average target of Rs 519.8. Brokers have a rating for ZEEL with 1 upgrade,4 price upgrades in past 6 months and 6 price upgrades in past 1 Year.

ICICI Securities Ltd | Retail Equity Research Revenue growth of 13.7% YoY was led by robust advertisement revenues, which grew 29.0% YoY to | 864.5 crore (vs. estimate of...