Published on 16/05/2017 1:41:36 PM | Source: Religare Securities Ltd

Buy Zee Entertainment Enterprises Ltd For Target Rs.592.00 - Religare Sec

Posted in Broking Firm Views - Long Term Report | #Zee Entertainment Enterprises Ltd #Broking Firm Views Report #Entertainment #Religare Securities Ltd

Another quarter of strong performance…

Zee Entertainment Enterprises Ltd (ZZEL) reported healthy Q4FY17 results on all parameters. Post demonetisation, advertising revenue was under pressure for media companies, however, the ad industry growth is back on growth track. Digitisation has played a major role in terms of bringing incremental subscription revenue for broadcasters. The management is confident of maintaining earnings growth momentum. ZEEL is a leader in Indian broadcasting segment with its diversified product offerings across genres and strong positioning of flagship channels in Hindi general entertainment space. Maintain BUY.


Q4FY17 Result Update:

* Net sales for the quarter came in at Rs 1,528crs, a marginal growth of 0.4% yoy. ZEEL's advertising revenue was flat at Rs 847crs, however, domestic advertising revenue showed continued growth and reported 8.1% yoy increase. International advertising revenue was impacted by country specific issues during the quarter. On subscription revenue front, domestic and international subscription revenues declined by 2.8% yoy and 18.7% yoy respectively, largely due to catch-up revenues in Q4FY16 and consolidation of only two months of sports business in the quarter.

* EBITDA for the quarter stood at Rs 468.7crs, a growth of 14% yoy. Prudent cost optimisation led to EBITDA improvement by 370bps yoy to 30.7%. The management has guided EBITDA margins to remain at current levels of 30%.

* The company received Rs 1,223crs on account of sale of sports business due to which reported PAT surged 568.5% yoy to Rs 1,514crs. On comparable basis, PAT increased by 28.3% yoy to Rs 290.8crs. Lower finance cost and higher other income boosted net profit margin by 410bps yoy to 19%.


Outlook & Valuation:

ZEEL has been our preferred pick in Media industry considering its leadership position in broadcasting industry. The company plans to invest heavily in new programing, without impacting margins, to retain its position amidst intense competitive scenario. Strong margins, presence across genres, cash rich balance sheet augurs well for the company's growth prospects. We estimate revenue, EBITDA and PAT to grow at a CAGR of 7.5%, 6.9% and 14.2% respectively over FY17-19E. We maintain BUY on the stock with a price target of Rs 592.


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