Buy Zee Entertainment Enterprises; target of Rs 179: Prabhudas Lilladher

buy

Prabhudas Lilladher's research report on Zee Entertainment Enterprises

We cut our FY27E EPS estimates by 4% as we account for dilution impact resulting from issuance of ~169.5mn fully convertible warrants at a price of Rs132 on a preferential basis to entities forming part of the promoter group. Out of the total preferential proceeds of ~Rs22.4bn, Z IN plans to deploy ~Rs10bn towards building new businesses, ~Rs7.1bn towards inorganic expansion while the balance will be utilized for general & corporate purposes. Post warrant conversion, promoter stake will increase to 18.3% lending better execution comfort on achieving 1) TV viewership share of ~17.5%, 2) adrevenue growth of ~8-10% and 3) EBITDA margin of ~18-20% in FY26E. We expect a modest 7.5% revenue CAGR over the next 2 years on a low base of FY25 with 540bps expansion in EBITDA margin given plans to achieve breakeven in the digital business.

Outlook

Retain BUY on the stock with a TP of Rs179 (earlier Rs137) as we increase our target multiple to 15x (earlier 11x; refer exhibit 4 for past trading history on Z IN) as preferential allotment to promoters lowers the execution risk challenges.

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Zee Entertainment Enterprises - 04072025 - prabhu