Q3FY20 results highlights
Key positives: Positive commentary on Board and Balance sheet.
Key negatives: Weak domestic ad performance.
Impact on financials: 11%/14% cut in FY20E/21E EPS. Introduce FY22E.
Valuation & View
Q3’s performance was slightly weaker than baked in tepid expectations. However, Mr. Goenka outlined many milestones which Z would want to achieve in the next 12 months namely (a) Board to be reconstituted with him being the sole representation of the promoter family, (b) an eminent personality, with Media/Tech. experience, to be inducted in the Board by early FY21, (c) surplus cash generated to be invested only in high quality liquid instruments, (d) inventory to come-off in FY21 (in terms of no of days) and (e) funds invested abroad to be repatriated by FY21E end. Outlook on Ad & Subs revenue is also fairly decent in tough economic and regulatory environment. We believe the street will anchor its expectations around the above deliverables and as these steps materialize it should be a strong re-rating event for Z. Current valuations, we believe, are attractive for the franchise (~18% viewership market-share, lowest cost content sourcing, and ability to run a tight ship while expanding its OTT space). Maintain Outperformer (TP Rs356 / 17.5x FY21E 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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