ZEEL's growth sustainable; target of Rs 422: ICICI Sec

ICICI Securities has upgraded Zee Entertainment's rating post a 35 percent growth in its ad revenues in the second quarter this year, says Vikash Mantri, media analyst with the brokerage house. He has a target price of Rs 422 on the stock.He credits nine percent of this ad revenue growth to the launch of its new channel — &TV — and the rest to its market share in other regional broadcasting channels.Majority of the revenues came from ads in the FMCG and e-commerce segment, he says, adding that this growth is sustainable.Though absolute returns might be difficult given the high valuations, the company will continue to outperform the market, Mantri adds.Below is the verbatim transcript of Vikash Mantri’s interview with Sonia Shenoy & Anuj Singhal on CNBC-TV18.Anuj: This add revenue growth of 35 percent that really surprised everyone. Where is this number coming from and do you think this is sustainable and can it drive further re-rating for Zee Entertainment?A: There are two components of this add growth that has come in. One is because of their new channel which is &TV and which is not there in the base. So, closed to around 9 percent is contributed to that. So, a like to like growth is around 26 percent. What we gather from industry is that the broadcasting TV space advertising driven by FMCG and e-commerce is growing at close to 20 percent. Zee with the backup of market share gains across regional properties has done better than that. So, 26 percent growth on a like to like is sustainable provided industry grows at this space and market share remains at the place they are.Anuj: What is your own channel check telling you? Let us assume this to be 26 percent like to like as you said, is this sustainable at this point in time? Do you have visibility of that in next four or five quarters? A: In case of Zee, we clearly have that visibility because they have gained market share across the regional properties. Now, until and unless market shares swing materially here and there this kind of a 25 percent growth for Zee is sustainable. Sonia: What would your own target price be on the stock now and with a 6-12 months horizon what should an investor look at?A: We recently upgraded the stock yesterday itself post the quarterly result and our target price stands at Rs 422 which is 30 time FY17. It is an add rating per se. Clearly we believe that this stock is going to outperform the market because clearly it is very difficult to find such kind of a growth especially in an environment when most of the companies are disappointing on growth. So, clearly we see outperformance to happen. Absolute returns might be difficult given the already high valuations.