Accumulate Zee Entertainment; target of Rs 130: PLilladher

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Accumulate Zee Entertainment; target of Rs 130: PLilladher

Prabhudas Lilladher is bullish on Zee Entertainment Enterprises and has recommended accumulate rating on the stock with a target of Rs 130 in its October 17, 2011 research report.

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Prabhudas Lilladher is bullish on Zee Entertainment Enterprises and has recommended accumulate rating on the stock with a target of Rs 130 in its October 17, 2011 research report.

"Zee Entertainment (ZEEL) has recorded a 4% YoY decline in ad revenues, owing to a high base in Q2FY11 as the India-Sri Lanka series was aired with no major properties this quarter. However, despite weakness in ratings for flagship Zee TV and for key regional channels, non-sports ad revenues showed positive YoY growth."

"Lack of major cricket properties helped cut losses in the sports business to Rs226m (loss of Rs542m in Q2FY11) on revenues of Rs881m (down 26% YoY). For H1FY12, sports losses are Rs792m (down 12% YoY), amounting to ~80% of the FY12 loss guidance of Rs1bn. Subscription revenue is now being received from Media Pro (distribution JV with Star Den) and is reported net of expenses. Consequently, the reported total pay revenue of Rs2.9bn is not comparable YoY. International subscription revenue declined 3% YoY. Increased programming hours on Zee TV and the regional channels and aggressive acquisition of satellite rights has led to 18% YoY increase in non-sports operating costs (grossed up for subscription related expenses not reported in Q2FY12). Higher EBITDA margin at 29% was driven largely by lower sports losses."

"Benefits of lower losses in the sports business are expected to be partially offset by the higher costs in the core business. Benefits of the Media Pro distribution JV continue to remain the primary trigger for Zee, going forward. We have adjusted our EPS upwards for FY12E (4%) and FY13E (5%) to account for better-than-expected ad revenues in non-sports business. Maintain our 'Accumulate' rating, with a target price of Rs 130 (Rs 124)," says Prabhudas Lilladher research report.  

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To read the full report click on the attachment