Sharekhan's research report on Zee Entertainment Enterprises
Q1 was muted with a 6%/20% miss in revenue/operating profit due to weak advertisement revenue growth and decline in subscription revenue. OPM, at 12.8% (down 661 bps y-o-y), missed our estimate by 223 bps due to higher programming & technology and marketing costs. Advertisement revenues were hit by FTA withdrawals (Zee Anmol) and lower ad spends by brands; subscription revenues declined given timing effect of some of B2B deals/renewals and a pricing embargo on linear revenue growth. ZEE5 revenue of Rs. 160 crore (up 43% q-o-q) but EBITDA loss widens to Rs. 235 crore. We cut our FY23-24 earnings estimate to factor in soft Q1FY23 revenue growth and lower margin assumption (given investment in content & marketing).
Outlook
We maintain a Buy on ZEEL with a revised PT of Rs. 310 (reflects cut in earnings estimate) given synergy benefits from the proposed merger, healthy traction in ZEE5, and reasonable valuation of 16.1x FY24E EPS.
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