Manoj Behera of PhillipCapital is confident of Zee Entertainment posting robust earnings going forward too with a CAGR growth of 25-30 percent.
Zee Entertainment’s consolidated net profit for the first quarter FY17 stood at Rs 217 crore versus CNBC-TV18 poll of Rs 281 crore year on year (YoY).
The total income came in at Rs 1,571.6 crore and the ad revenues for the quarter were up 19.2 percent at Rs 912 crore YoY. The subscription revenues were up 14.2 perecnt at Rs 528 crore YoY.
Manoj Behera of PhillipCapital is confident of the company posting robust earnings going forward too with a compounded annual growth rate (CAGR) growth of 25-30 percent, which could help prop-up the stock price.
The company has managed to beat their estimates on most counts - ad revenues, EBITDA margins, subscription revenues and profits from sports business too, says Behera.
Therefore, the house is building-in a full year estimate of close to 17-18 percent ad revenues but it is too soon to say whether they will revise their estimates, says Behera.
He is also confident that the company will be able to sustain its ad revenue growth in spite of weak ad spends at FMCG firms like HUL.
In the sports business, EBIT was Rs 17 crore versus street estimate of Rs 25 crore loss. This very very positive, says Behera.
The subscription revenue growth came in at 14 percent versus street estimates of 12-13 percent. “Stock currently trading at life time high multiples, so rerating currently looks difficult,” says Behera.
Below is the verbatim transcript of Manoj Behera’s interview to Mangalam Maloo, Navin Shetty & Anuj Singhal on CNBC-TV18.
Anuj: Your first thoughts on the numbers, the income, advertisement revenue and EBITDA performance actually looks quite good thought there is an impact on the net profit?
A: The advertisement revenue at 19 percent is clearly ahead of our estimate and also street estimate. So that is a positive surprise on the advertisement revenue. Secondly, if I look at the subscription revenue also it has grown up by closed to 14 percent over the street estimate of 12 to 13 percent growth. So, the topline is clearly ahead of estimates.
If I look at EBITDA performance and EBITDA margin performance, EBITDA Rs 453 crore is clearly ahead of our estimate of close to Rs 410 crore and margin performance of close to 29 percent is ahead of street estimate of 27 percent. So, clearly the operational numbers are ahead of our estimate.
Mangalam: The sports business has actually turned into a profit in this quarter. The sport business has actually posted an EBIT gain of closed to Rs 17 crore versus a street estimate of Rs 25 crore loss. How does that change things for you? Like you are saying operational performance has been good the ad revenue at 19 percent how much of that is in the price and are you going to review your call on Zee Entertainment after this kind of performance?
A: Profitability in the sports business is definitely a positive surprise because in this current quarter we had two India related sports properties. So, we are expecting close to Rs 25 crore of losses. So, profitability in the sports business is definitely a positive surprise.
Regarding full year estimate, we are building in close to 17-18 percent ad revenue growth. So, it is too early to take a call whether we would be revising our estimates.
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