Q1FY20 results highlights
Key positives: Strong domestic subscription revenue growth.
Key negatives: Weak domestic ad performance.
Impact on financials: Broadly unchanged.
Valuation & View
Although ad growth was on the lower side in Q1, Z’s strong franchise is clearly visible in its domestic subscription performance as it quickly managed to pass on increased tariffs under the NTO, especially in Southern markets where its portfolio is popular but was at a subpar realisation earlier. ZEE5 ramp-up too is on track as seen by its MAU increase over the last four quarters. Z’s aggression in building a strong content slate is a near-term negative on the BS but builds a medium-term competitive advantage. On the stake sale front, the announcement that the promoter has one binding offer in hand (with one more possibly on the way) should allay concerns of pledged shares coming to the market over the next few months. With the increasing likelihood of a deal getting consummated, the market should start revaluing Z on its fundamentals rather than ascribing distress valuation multiples. Maintain OP with a PT of Rs478 (25x FY20E EPS).
Zee Entertainment Enterprises is an integrated media and entertainment company engaged in broadcasting and content development, production and distribution of films via satellites. Co. is engaged in Hindi entertainment and movies; English content programming; sports channels and programming; religious and alternate lifestyle programming; music channels; special interest channels; and high definition channels with varied programming in over 169 countries globally. Also, on Zee Bollyworld channel, Co. dubbs or subtitles movies and series in English, French, Arabic, Russian, Mandarin and Melayu- Bahasa.
IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.
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