MOSL: Zee Entertainment (Buy) - Strong quarter - healthy outlook
Zee Entertainment: Strong quarter; healthy outlook
(Z IN, Mkt Cap USD8.7b, CMP INR591, TP INR690, 17% Upside, Buy)
- Robust ad revenue drives EBITDA: Ex-sports revenue grew 21% YoY to INR17.3b (5% beat), led by robust ad growth (+24% YoY to INR10.5b). Subscription revenue rose 14% YoY to INR5.5b. However, a 44% surge in SGA cost (launch of Z5) limited EBITDA growth to 8% YoY (INR5.1b, 17% beat). Consol. revenue/EBITDA grew 13%/8% YoY, while consol. margin shrunk 135bp YoY to 29.3%. Adj. PAT fell 42% YoY to INR2.3b (38% beat), led by higher MTM losses. Domestic ad revenue (excl. sports, RBNL and IWPL) jumped 22% YoY, led by healthy ad spend across categories. Domestic subscription (ex-sports) grew 18% YoY, aided by higher catch-up revenue (from closure of content deals during the quarter).
- FY18 performance: Consol. revenue/EBITDA grew 4%/8% YoY, while adj. PAT was up 8% YoY.
- Concall highlights: 1) Ad revenue growth in FY19 is expected to be higher than 11-12% growth in the TV ad market. 2) Low-teens growth is expected in subscription revenue in FY19. 3) EBITDA margin likely to remain above 30% (FY19). 4) Management plans to foray in the Malayalam genre (FY19) and also add new channels in other genres in regional markets.
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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