ICICI Sec raises estimates on Zee Ent by 4-5% post Q1 nos

Zee Entertainment exceeded street estimates by posting good set of Q1 earnings. Vikash Mantri, ICICI Securities has now raised earnings estimates on the company by 4-5 percent. He told CNBC-TV18 that the surprise largely was on the advertising front as it reported 18 percent growth even in a challenging environment.

The company registered 42.04 percent increase in consolidated net profit to Rs 224.64 crore for the first quarter ended June 30, 2013, while the CNBC-TV18 poll was expecting a rise of only 20% at Rs 190 crore.

"The results were largely inline with a marginal beat and the advertising numbers were good, however there was certain disappointment on the subscription revenue," he said.

Below is the verbatim transcript of his interview to CNBC-TV18

Q: Did Zee Entertainment's numbers turned out to be better than your expectations; did you change your estimates after that?

A: Yes, they were better than an estimate by a margin and we have raised our estimates by 4-5 percent. The surprise largely came on the advertising front, which even though we have heard everybody talk about challenging environment. They have reported 18 percent growth, which is very good.

However, there was certain disappointment on the subscription revenue. So, the results were largely inline with a marginal beat, the advertising numbers were good.

Q: Are you confident enough of what you have seen on their advertising revenue performance to extrapolate that in terms of what you could see in the next few quarters because for many media companies this add revenue growth has been quite volatile?

A: I complete agree with you. I think while 18 percent for the quarter was good, it will be very challenging to show similar numbers for the rest of the year. We have seen multiple companies talking about cutting on ad growth or ad spent per se and also the tiff that is going on between the broadcasters, Television Audience Measurement (TAM). Advertisers along with 12 minute cap on Telecom Regulatory Authority of India (TRAI), will put further pressure on advertising for the broadcasters in general, also overall the ratings of the universe post digitisation has seen fragmentation and they have been down.

So, one will see that impact of those ratings also show up in numbers of broadcasters and Zee specifically. Therefore, we do not expect the advertisement revenue growth to remain at these heightened levels and one will see pressure in the next few quarters.