Hold Zee Entertainment Enterprises; target of Rs 145: Prabhudas Lilladher

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Prabhudas Lilladher's research report on Zee Entertainment Enterprises

ZEEL reported better than expected performance with EBITDA margin of 16.0% (PLe 12.5%) led by cost optimization efforts and narrowing losses in ZEE5. Over the last 2 quarters, ZEEL’s content and employee cost is down 17% and 11% respectively. Further, losses in ZEE5 are at a 4-year low level of Rs1,588mn. Despite a strong beat at operating level, we broadly maintain our estimates as we were already building-in a sharp back ended recovery (EBITDA margin of 17.3% in 2HFY25E) led by the cost optimization drive. We believe benefit of cost rationalization is partly overshadowed by a weak operating environment as evident from decline in domestic ad-revenue since 2QFY23 barring one quarter. While cost frugality is commendable, recovery in ad-environment is critical for re-rating.

Outlook

Retain HOLD with a TP of Rs147 (earlier Rs143). We have revised our target P/E multiple to 11x (earlier 12x) as we roll forward our valuation to Sep26E.

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Zee Entertainment Enterprises - 21102024 - prabhu