Maintain ‘add’ on ZEE Entertainment Enterprises (ZEE) with target price of R385 per share. The company is gearing for the launch of &TV, its biggest investment since ZEE TV. &TV has engaged some the best production houses and talent, its distribution reach would be comparable to ZEE, and it has a massive marketing plan. While these measures do not guarantee success, ZEE is taking the right steps and the timing could be apt if the economy recovers in FY16.
ZEE will launch its second full-fledged Hindi GEC, &TV, on March 2, 2015. &TV’s content will be contemporary and is expected to appeal to the male audience as well (versus ZEE’s largely female-centric content). &TV has engaged major production houses. The cost of its flagship non-fiction show (with Shah Rukh Khan as anchor) will be higher than ZEE’s non-fiction content. &TV will be launched with ~21 hours/week of original programming (28 on ZEE TV). ZEE’s management indicated that programming costs in the first year could be more than R250 crore. We believe overall operating costs could be around R400 crore. The management indicated that ebitda could remain flat or decline marginally in FY16e. &TV’s operating loss would depend on ad revenues, which would be determined by ratings. We believe &TV would to have to garner at least 1 lakh TVTs in the opening week.
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