Zee Ent Q1 net seen flat, contest cost to dent margins

Zee Entertainment is likely to report marginal growth in April-June quarter. According to a CNBC-TV18 poll, the general entertainment company may post Q1FY16 net profit at Rs 214 crore, up 2 percent from Rs 210.6 crore in corresponding quarter last fiscal. Sales is expected to rise 17.4 percent at Rs 1275 crore against Rs 1085.7 crore in Q1FY15.

However, EBITDA may slip 5 percent to Rs 293 crore from Rs 309.2 crore year-on-year. Margins are going to be a drag as increased content costs of its newly launched sister channel &TV may eat away 550 basis points of margins on an annual basis. This is the first full quarter of &TV.

Analysts polled by CNBC-TV18 say margins are likely to improve sequentially, due to one-off costs for &TV launch in January 2015. Fresh programming and weekend shows like The Voice India have slightly higher content costs. In its programming bouquet, &TV has Shah Rukh Khan's India Poochega - Sabse Shaana Kaun? and other fiction line-up that includes shows like Razia Sultan, Begusarai, Bhabi Ji Ghar Par Hai! and Badii Devrani.

During the quarter, its advertising revenue growth is seen to in the range of 14-15 percent. Ad revenue may look subdued on account of base effect. Last year, there was General Elections in this time.

Subscription growth may be in the range of 18-19 percent as digitisation has been slower than expected, though realisations is expected to improve. The number of subscribers was up 24 percent in Q4FY15.

Ratings of Zee have fallen marginally, but won’t significantly impact ad revenue growth, according to CNBC-TV18 poll. Similarly, growth in ratings of regional channels may not immediately result in higher ad revenue. Zee Marathi may see higher ad revenue growth, due to airing of the film Time Pass 2.

Zee Sports is likely to see a loss of Rs 10-15 crore.