Buy Zee Entertainment Enterprises; target of Rs 296: Prabhudas Lilladher
Prabhudas Lilladher is bullish on Zee Entertainment Enterprises has recommended buy rating on the stock with a target price of Rs 296 in its research report dated February 05, 2021.
February 08, 2021 / 03:42 PM IST
Prabhudas Lilladher's research report on Zee Entertainment Enterprises
ZEEL’s revenue/EBITDA beat our estimates by 32%/38% respectively led by accrual of content syndication revenue of Rs5.5bn in 3QFY21. Even after adjusting for this one-time windfall, the beat was substantial given strong recovery in domestic ad-revenues (increased 7.5% YoY on a pre-COVID base despite IPL being around). Given the recovery in ad-market, we increase our FY21/FY22/FY23 adjusted EPS estimates by 7.7%/2.6%/2.1% respectively. As highlighted in our initiation report (Link of the report), we believe ZEEL is ripe for re-rating given concrete steps taken to strengthen governance & disclosure levels backed by sharp cyclical recovery. However, we remain skeptical of plans to expand the movie production business given it is highly volatile and margin dilutive in nature.
Nonetheless, given the valuation comfort (stock trades 16x/14x our FY22/FY23 EPS estimates; LPA is ~27x) and likely emergence of ZEE5 as future growth engine in changing content consumption landscape we maintain our BUY rating on the stock with a revised TP of Rs296 (16x FY23 EPS of Rs18.5; no change in target multiple).
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