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* Zee: Given a high base, weak macroeconomic conditions, and conversion of FTA to pay channels, we expect Zee to report a 12% YoY de-growth in domestic advertising revenues. Domestic subscription revenue is likely to grow by about 18% YoY, but -5% QoQ, to ` 6.1bn. However, subscription revenue may remain subdued in FY21E, after a robust gain in FY20E of about 27-28% YoY (H1FY20 36%), driven by new TRAI tariff order.
Earnings risk persist, driven by advertising slowdown, TRAI tariff order, and investments in digital. We believe that the Zee stock will potentially go through time and/or price correction in the short term. The improvement in FCF generation will be the key positive trigger.
* Print: Given weak macroeconomic conditions and subdued advertising spends by most of the large categories: government, automobile, real estate, and education, among others, we expect the revenue and thus earnings to remain soft. Newsprint costs is supportive and a key positive.
Valuations at 6-8x, good governance, 55-65% dividend payout, 10-12% FCF yield make print media companies attractive. However, structural risk of decline in readers and print media becoming irrelevant have resulted in loss of investor interest.
* Key parameters to watch:
(1) Outlook on advertising growth and
(2) management commentary from Zee on potential write-offs, status on group company receivables, and Zee5 etc. would be key parameter to watch.
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