Zee Entertainment Enterprises Ltd. share price target

We revise down our EBITDA/PAT estimate by 12% for both FY22/FY23 for the second straight quarter (after last quarter's 57% cut), factoring in FY23 EBITDA at 16% above FY20 levels as weak recovery, coupled with an intensifying content spend, should hurt earnings. Maintain Neutral. Consolidated revenues grew 35% YoY to INR17.7b (-10% QoQ; 5% beat), as ad revenue was up 2.2x YoY, driven by the lower impact of the second COVID wave v/s the first wave. Compared with pre-COVID levels (1QFY20), domestic ad revenues were lower by 22.7%....

Due to uncertainties in the economic climate, management decided to scale down its investments in Sugarbox for the foreseeable future. We remain optimistic on the stock, as company expects double digit growth in ads business, while OTT platform should support strong growth in the subscription business. We reiterate our BUY rating on the stock with rolled forward target price of Rs. 233 based on 13x FY23 adj. EPS. Ads and subscription revenue supports topline Consolidated revenue rose 0.8% YoY to Rs. 1,966cr, with Advertisement revenue...

Ad recovery to be function of pandemic tail The management expects ad revenues to witness double digit growth (over FY20 levels) provided the Covid second wave tapers soon. The company also indicated there would be some weakness in ad revenues in Q1 due to second wave and original programming for broadcasting business is remaining only for a few days for both Hindi as well as regional channels. We bake ~23% CAGR in ad revenues in FY21-23E on a depressed base of FY21 wherein ad revenues declined 20%. The company expects...

We have revised down our FY22E/FY23E EBITDA/PAT by ~7%/5% on reduced margin guidance due to increased content investment in both broadcasting and the digital business. Lower investment guidance towards Sugarbox is a key positive. Maintain Neutral....

ZEE is one of the largest media companies in India

Advertising revenues back on track, while Zee 5 is gaining traction Zee's Q3 FY21 numbers were broadly in line with expectations in the festive third quarter of FY21. Advertising revenues grew by 5.8% yoy and 44% qoq as economy revived and the effect of pandemic faded off in the latter half of the quarter. Subscription revenues grew by 18% yoy and 5.2% qoq as Zee 5 business gained momentum. The core subscription revenues would have remained flattish on uncertainty related with NTO2.0. However, there was a one-off syndication revenue element of 5.51 bn on sale of certain content inventory in international business. Excluding this, total revenues grew by 6.3% yoy. EBITDA margins adjusted for this revenue stream...

We revise our EBITDA estimate by 9%/5% for FY21/FY22E, building in faster recovery, but high content investment would keep EBITDA margins lower at 27% (v/s >30% historically) in FY22E. Maintain Neutral....

Story in Charts ZEEL's viewership trend & key financial metrics ........................ 4 Story in Charts Pay TV & OTT evolution trends ................................................. 5 ZEEL Reinventing with changing times .............................................................. 6 Investment Argument............................................................................................. 7 ZEEL 4.0: A new transformational journey ......................................................... 7 TV ad-ex traction to slow as digital medium evolves .......................................... 9 ZEEL has strong presence in GEC & movie genres ........................................ 11 NTO 1.0 was a key catalyst in aiding subscription revenue ............................. 18...

Steady growth in overall Subscription revenue coupled with recovery from Advertising should support topline growth in the near-term. We remain optimistic of Zee's future growth prospects and reiterate our BUY with target price of Rs. 245 based on 14.5x adj. EPS. Ad spends push up topline, PAT improves sequentially Q2FY21 revenue grew 31.3% QoQ to Rs. 1,723cr (-18.8% YoY) primarily on account of growth strong recovery seen in Advertising revenue at Rs. 903cr (+114% QoQ), as Ad spends see gradual improvement. Subscription revenue also went up 7.5% QoQ...