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Last Updated : Jan 21, 2020 09:05 AM IST | Source:

Zee Ent Q3 preview: Brace for disappointing show, focus on corporate developments

The only point of relief could be the OTT platform which is expected to show a strong subscription.

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Media and broadcasting major Zee Entertainment Enterprises will release its December quarter numbers on January 21 and most brokerages are of the view that the company's Q3FY20 scorecard may disappoint the Street.

The only point of relief could be the OTT platform which is expected to show a strong subscription.

Other than the quarterly numbers, investor focus will be on the recent developments regarding the reconstitution of the board and concerns raised by outgoing directors in their resignation letters.


Brokerage firm Kotak Securities expects October-December quarter to be weak for Zee Entertainment due to slowdown across advertising categories and impact of the drop in reach or viewership of select channels.

"Zee’s Q3FY20 operating performance would be disappointing. We expect a sharp 14 percent year-on-year (YoY) decline in advertisement revenues, significant underperformance versus industry growth rate which may remain flattish. We expect a 630 bps YoY decline in EBITDA margin to 28.6 percent," said Kotak Securities.

As per Kotak, such a steep underperformance versus industry could be due to viewership share loss of the flagship channel (Zee TV) and promoter distractions.

The estimates of Kotak Securities show Zee Entertainment may post net sales to the tune of Rs 2,102.4 crore for the December quarter which is down 3 percent YoY or 0.9 percent QoQ.

EBITDA can be to the tune of Rs 600.3 crore, down 20.4 percent YoY or 13.4 percent QoQ.

With a 21.5 percent YoY fall (30.5 percent QoQ), Kotak Securities expects Zee's adjusted PAT to come in at Rs 412.1 crore for the December quarter.

"We model 22 percent YoY growth in domestic subscription revenues. Our estimates do not model any provision on overdue receivables from Dish TV and Siti, and amortization expense pertaining to inventory built up in the past 9-12 months. Adjusted PAT and EPS is excluding RPS impact," Kotak clarified.

On the other hand, Motilal Oswal Financial Services expects Zee's adjusted PAT to the tune of 424.6 crore, down 19 percent YoY.

Besides, Motilal expects the company's ad revenue to remain weak and expects it to fall at 12 percent YoY. Lower revenue will drag the margin, said the brokerage.

The estimates of Motilal Oswal show a 20.3 percent YoY fall in Zee's EBITDA at Rs 601.2 crore and a 0.8 percent YoY fall in the company's revenue to Rs 2,148.5 crore.

Brokerage firm Edelweiss Securities expects Zee's advertisement revenue to decline in Q3FY20 owing to the economic slowdown, cutback in ad spends by large categories (consumer goods, auto, telecom and retail) and withdrawal from the FreeDish platform.

However, subscription revenue growth may remain robust owing to the tailwind from NTO and viewership gains in portfolio channels, Edelweiss said.

"Amid this challenging environment, we expect Zee's revenue to decline nearly 5 percent YoY, with domestic ad revenue declining about 13 percent (on a base of 22 percent) and subscription revenue growing nearly 19 percent YoY (on a base of 29 percent)," Edelweiss Securities said.

The brokerage expects EBITDA margin to contract about 630 bps YoY owing to a decline in ad revenues and estimates EBITDA and adjusted PAT to decline about 22 percent and 21 percent YoY, respectively.

"The company's management believes that the new amendments proposed by TRAI are not likely to impact the business materially and given that this will impact all the players, chances of litigation in this matter are highly likely," Edelweiss highlighted.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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First Published on Jan 21, 2020 09:05 am
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