Motilal Oswal - Zee Entertainment Enterprises Limited (ZEEL) MOSL: ZEE ENTERTAINMENT (Buy)-Better growth to drive valuation

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Motilal Oswal

Aliasgar Shakir

MOSL: ZEE ENTERTAINMENT (Buy)-Better growth to drive valuation

Zee Entertainment: Better growth to drive valuation

(Z IN, Mkt Cap USD8.8b, CMP INR593, TP INR705, 19% Upside, Buy)

Ex-sports revenue rebounds with 23% growth, EBITDA up 17%: Ex-sports revenue rebounded (+23% YoY) to INR18.4b on a low base (3QFY17 was impacted by demonetization). Consolidated revenue grew 12% YoY (7.6% beat). EBITDA expanded 15% YoY to INR5.9b (8% beat). Ex-sports EBITDA increased 17% YoY – lower than revenue growth due to higher SG&A related to a) an increase in original number of hours of content, b) three movie releases and c) INR400m of one-off expense related to Zee’s 25-year branding. EBITDA margin improved 90bp YoY to 32.3% (in-line). PAT rose 29% YoY to INR3.2b. Investment in secured NCD of INR1.67b is overdue, while Zee is pursuing recovery options.
Ad revenue propels growth; subscription revenue delayed: Domestic ad revenue jumped 26% YoY (adj. for sale of sports business and acquisition of RBL), with healthy ad spends across categories. Ex-sports domestic subscription revenue grew at a muted 7.5% due to longer time taken for contract renewal negotiations on account of the TRAI’s tariff order.
Upbeat ad and subscription outlook: Improving ad market outlook with broad-based ad spends across sectors and healthy viewership should lead to steady 15% ad revenue growth in 4QFY18 and 16% CAGR over FY18-19E. Domestic subscription revenue (ex-sports) led by closure of content contracts is expected to grow 16% in 4QFY18 and at 14% CAGR over FY18-19E.

18/01/2018 14 EN

Underlying

Zee Entertainment Enterprises Limited

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.

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INE256A01028 National Stock Exchange of India India

Provider

Motilal Oswal

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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Analysts

Aliasgar Shakir

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MOSL: ZEE ENTERTAINMENT (Buy)-Better growth to drive valuation

Zee Entertainment Enterprises Ltd: 1 director

Increased risk weighs on ZEE ENTERTAINMENT ENTS., penalising its rating down to Neutral

MOSL: ZEE ENTERTAINMENT (Neutral)-Weak recovery, viewership loss; margin guidance cut for second quarter in a row

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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