MOSL: ZEE ENTERTAINMENT (Buy)-Poised for secular earnings growth-Expect 16% EPS CAGR over FY17-20
​ZEE ENTERTAINMENT: Poised for secular earnings growth; Expect 16% EPS CAGR over FY17-20; maintain Buy
(Z IN, Mkt Cap USD8.3b, CMP INR569, TP INR690, 22% Upside, Buy)
- Recovery in the ad market coupled with Zee TV’s improved BARC rating in Hindi GEC and focus on regional channel bouquet should help the company to garner higher than industry ad revenue growth.
- We expect subscription revenue to grow in mid-teens in FY19/20 – on the back of gains from digitization and monetization of DAS III/IV markets. TRAI order should consolidate the market towards top broadcasters.
- We expect overall investments of INR7b towards movie/music rights acquisition and movie production in FY18. RoCE should recover from FY19, driving healthy FCF.
- We believe a secular 16% EPS CAGR over FY17-20 should support the premium valuations. We maintain Buy, with a revised target price of INR690 (35x December 2019E EPS of INR19.8).
Expect higher-than-industry ad revenue growth
With the impact of demonetization and GST implementation waning, the overall ad market should see healthy growth from 3QFY18. ZEE’s flagship channel, Zee TV’s BARC ratings across Hindi GEC have remained healthy and it has consistently featured among the top-2 in the last few months. This should support higher-than -industry ad revenue growth for ZEE. We estimate 15% CAGR in ZEE’s ex-Sports ad revenue over FY17-20, ahead of KPMG’s estimate of 14% CAGR for the industry.
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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