Hold Zee Entertainment; target of Rs 565: ICICI Direct

ICICI Direct's research report on Zee Entertainment

During the quarter, the company acquired 100% equity stake in two entities 9X Media Pvt Ltd (9XM) and INX Music Pvt Ltd (INX) for a total consideration of Rs 160 crore strengthen its television music portfolio in Hindi and regional languages. In FY17, 9XM reported revenue of Rs 135 crore with EBITDA loss of Rs 17.7 crore while INX reported revenue of Rs 23.37 crore during the same period with EBITDA of Rs 6.12 crore.

Outlook

We highlight that Zee has indicated that it is likely to launch its new digital product, ‘Z5’ in H2FY18, integrating and improving its current digital offerings. We await fine prints of Z5 - and implementation of new tariff regime, which could provide further clarity on subscription growth trajectory. We value the company at 31x FY19 P/E to arrive at a target price of Rs 565 and maintain our HOLD recommendation on the stock.