Reduce Zee Entertainment; target of Rs 130: Emkay Global Financial

Emkay Global Financial's research report on Zee Entertainment

Zee reported another quarter of subpar advertising growth, down another 8% YoY in Q3FY25. Ad revenue has now declined (YoY) in nine of the last ten quarters. Subscription revenue reported a steady uptick of 6.6% YoY while other sales and services was weak on account of no major movie releases. EBITDA margin jumped up by 590bps YoY to 16.1%, ahead of our estimate of 14.2%, as the company curtailed its operational expenses. The macro environment remains sluggish, particularly on the urban front, hindering advertising growth. The management highlighted it has successfully completed the first phase of its turnaround plan centered around cost optimization, and focus now is on driving revenue higher. We trim FY25-27E EBITDA by 4-11%, factoring in the Q3 performance and slower advertising growth going ahead.

Outlook

We believe the company will find it difficult to meaningfully improve margins from current levels in the absence of advertising growth. We maintain REDUCE on Zee, and lower our TP by 7% to Rs130 (8x Dec-26E Broadcasting EBITDA).

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