MOSL: ZEE ENTERTAINMENT (Buy)-Ad recovery in sight-subscription growth stable
​Zee Entertainment: Ad recovery in sight; subscription growth stable
(Z IN, Mkt Cap USD7.8b, CMP INR526, TP INR630, 20% Upside, Buy)
- Ex-sports revenue up 7%, EBITDA flat: Ex-sports revenue rose 7% YoY, led by domestic ad and subscription revenue. Consol. revenue fell 7% YoY to INR15.8b (in-line). Consol. EBITDA stood at INR4.9b (flat YoY, 4% beat) with a 31% margin (+210bp YoY), despite lower revenues, led by 25% YoY savings in content cost. PAT surged 148% to INR5.9b (est. of INR3b). PAT, after adjusting for INR1.3b exceptional gains from sports, INR1.6b other income from equity revaluation and reversal of INR81m interest provision, rose 21% YoY to INR2.9b (7% miss).
- GST slows ad, subscription growth: Domestic ad revenue grew 6% YoY (ex-sports, RBNL and IWPL) to INR9.3b, impacted by GST. Overall ad growth was meager 3% YoY to INR 9.9b (in-line) due to 34% fall in international ad revenues on currency appreciation and region-specific issues. Domestic subscription revenue ex-sports grew 7% to INR4b, as TRAI tariff order delayed contract renewals. Overall subscription revenue fell 14% YoY to INR5b (est. of INR4.8b).
- Ad recovery in sight; subscription growth stable: With the onset of festive season, domestic ad growth strongly rebounded to normal level, with broad-based recovery (incl. FMCG and ecommerce). Zee’s strong ratings should be maintained, with an increase in original content of flagship channel to 32 hours by 4QFY18E from 28 hours. We expect 15% ad revenue growth in 2HFY18 and 16% in FY19E. Subscription revenue should grow at 12%/14% in 2HFY18/FY19E.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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