Maintain buy on Zee Ent with target of Rs 424: LKP Securities

Published: January 23, 2015 12:25 AM

Zee Entertainment posted strong performance in Q3 at topline buoyed by advertising revenues which...

Zee Entertainment posted strong performance in Q3 at topline buoyed by advertising revenues which grew by 8.5% y-o-y and 18% q-o-q on strong market share gain in all of its genres and channels like the movies basket, Zee Marathi, Zee Telugu and Zee Bangla.

In the prime time, Hindi GEC gained market share upto 20.9% while staying at the third position, while Zee Marathi continued to extend its market leader position at 51.8% market share.

Sports losses remained stable sequentially. On the subscription business, domestic revenues increased by 4%y-o-y.

Other sales and services which included syndication of sports business saw an unusual surge due to presence of more cricket series (non India series) in the quarter. n the margin front, EBITDA margins came in at 25.9% as operating expenses expanded by 37.9% q-o-q on the back of expenses related with new launch placement costs, brand makeover costs, CSR expenses and festive season related marketing costs.

Subscription revenues may see a subdued growth in FY16 as DAS implementation in Phase 3 and 4 has got delayed.

However, the increased action in a la carte payment scheme may gather steam in FY16 and post better revenues than FY15.

However, the true growth in this business will come FY17 onwards when there will be actual implementation of DAS in rural India which has a significant potential to offer to Zee.

We have raised our target price from R356 to R424 and have maintained our buy rating on the stock.

By LKP Securities

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