Zee Entertainment rating revised to ‘hold’ from ‘buy’; here’s why

By: | Updated: July 12, 2016 8:56 AM

Our recent meeting with the management of ZEEL suggests the following, Ad revenue growth to remain healthy (above industry growth of 14-16%) despite relatively lower market share in its flagship channel – continued strong performance in regional channels to compensate.

Our recent meeting with the management of ZEEL suggests the following, Ad revenue growth to remain healthy (above industry growth of 14-16%) despite relatively lower market share in its flagship channel – continued strong performance in regional channels to compensate.

Domestic subs revenue to grow at 14-16% in FY17 (due to possible regulatory concerns from TRAI regulations) and revive FY18 onwards with phase III digitization benefits playing out.

Management remains focused on enhancing its content investment and international presence, which will drive medium term benefits. While we await clarity on TRAI’s initiatives on content parity, we continue to like ZEEL from a 2-3 year prospective as it is well placed to benefit from higher ad spends and domestic subs revenue growth. We revise our rating to HOLD from BUY on stock price appreciation.

ZEEL’s flagship channel, Zee TV, lost market share over the last few months – this was primarily due to (a) decline in programming hours (as 2 shows went off air) and (b) dispute in distribution arrangement with two regional players.

Management expects to regain lost market share as corrective measures have been taken to address the same.

Management outlined four key priorities going ahead: attain leadership in key genres, scale up content offering and expand globally, proactively addressing consumer demand through relevant content — enhanced focus on digital, and attain sustainable profitable growth — RoI focused approach to continue.

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