Despite weak ad-environment, ZEEL reported better than expected performance with EBITDA margin of 16.1% (PLe 14.5%) led by cost optimization efforts and narrowing losses in ZEE5. Since the merger fallout, cost rationalization has been a focal point to drive operational improvement and ZEEL is making steady progress on that front. In 9MFY25, ZEEL’s content and employee cost was down 14% and 9% respectively. Further, EBITDA loss in ZEE5 is at multi-quarter lows indicating a renewed frugal approach in digital business.
OutlookWe believe true operating leverage benefit of the ongoing cost optimization exercise is overshadowed by weak ad-environment. While cost frugality is commendable, recovery in ad-market is critical for re-rating. Retain HOLD with a TP of Rs137 (12x Sep-26E EPS; no change in target multiple).
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