Zee Entertainment: Why an 18% linear TV margin crash keeps Motilal Oswal ‘Neutral’ with 9% downside potential

Persistent Ad revenue weakness

The company’s domestic advertising revenue remained a significant concern, having declined almost 37% since FY19. For FY26 specifically, ad revenue fell 11% YoY, and the management expects near-term weakness to continue as FMCG companies curtail spending following the West Asia conflict.

Structural shift to digital

Analysts at Motilal Oswal see long-term downside risks to ad revenue recovery due to a structural shift in advertising budgets away from traditional television toward digital media. Even their modest forecast of a 3.5% CAGR in ad revenue through FY28 is considered at risk due to this trend.

Severe margin contraction

Zee Entertainment’s profitability has been heavily impacted, with adjusted EBITDA margins contracting by roughly 510 basis points to 9.3% in FY26. 

As per the Motilal Oswal report, the performance fell far short of the company’s earlier aspiration to achieve margins of approximately 18%.

Struggling linear TV business

While the digital platform (ZEE5) has reached operational EBITDA breakeven, this success is being offset by a ‘dismal’ performance in the core linear TV segment.

In FY26, linear TV revenue declined 10% YoY, and its margins contracted by a sharp 18 percentage points.

Elevated costs and accounting changes

Profitability is further pressured by high operating expenses, including a 44% YoY increase in advertisement and promotional (A&P) spends and elevated legal charges. Additionally, a change in the accounting policy for movie rights has led to accelerated amortisation, which contributed to an operating loss in the fourth quarter.

Zee Entertainment’s Q4FY26

The company reported a consolidated net loss of Rs 104 crore in Q4FY26, as against a net profit of Rs 188 crore in the same period a year ago. The company’s operating revenue fell 7% year-over-year to Rs 2,025 crore in Q4FY26, compared with Rs 2,184 crore recorded by the company in the same period of the previous financial year.

On a sequential basis as well, the company reported a loss, against a net profit of Rs 155 crore in Q3 FY26, while the revenue dropped 11% quarter-on-quarter (QoQ) versus Rs 2,280 crore in Q3FY26.

The fall in the company’s net profit and revenue in Q4 came on the back of 4% YoY and 5% QoQ dip in advertising revenue, while the revenue contribution of the other sales & services segment fell sharply by 47% YoY and 49% QoQ. 

On the operating front, the Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) loss was Rs 269 crore compared with Rs 285 crore in Q4FY25 and Rs 240 crore in Q3FY26. The adjusted EBITDA declined 51% YoY and 42% QoQ.

For the whole of FY26, its net profit fell 60% to Rs 271 crore versus Rs 679 crore in FY25. The operating revenue fell 2% to Rs 8,099 crore in FY26 versus Rs 8,294 crore in FY25.

ZEE Entertainment’s share price performance

The share price of ZEE Entertainment has fallen 6.7% in the last five trading sessions. The stock has dropped almost 4% in the past one month and 15% in the last six months. ZEE Entertainment’s stock price has eroded nearly 33% of investors’ wealth over the past 12 months.

Disclaimer: The investment ratings, target prices, and growth projections discussed in this report are based on institutional research analysis and do not constitute direct buy, sell, or hold recommendations for retail investors. Consumer discretionary and retail stocks are subject to market volatility, shifting consumer preferences, and macroeconomic risks, meaning individual portfolio performance can vary. Readers are strongly advised to consult a SEBI-registered investment advisor or qualified financial professional before making specific equity allocation decisions.

This disclaimer has been generated using AI to support user well-being and responsible content consumption.