Hold Zee Entertainment Enterprises; target of Rs 157: Prabhudas Lilladher

Prabhudas Lilladher's research report on Zee Entertainment Enterprises

ZEEL reported better than expected performance with EBITDA beat of 10% aided by narrowing losses in digital business and employee cost rationalization. We believe recalibration measures taken to reset the cost base by re-visiting content, technology, marketing and employee spends has started yielding results and accordingly we expect sharp improvement in EBITDA margin to 16.5%/19.2% in FY25E/FY26E. Further, likely improvement in ad-environment from 2HFY25E and accrual of benefits from NTO 3.0 is likely to result in sales CAGR of 8% over FY24-FY26E.

Outlook

Despite a strong operating performance, we broadly maintain our estimates as we re-align our domestic ad-revenue growth assumptions in light of weaker performance in 1QFY25. Retain HOLD with a TP of Rs157 (12x FY26E EPS; no change in target multiple). Deployment of FCCB funds will be keenly eyed in near term and can act as re-rating trigger.