Dolat Capital recommended accumulate rating on Zee Entertainment with a target price of Rs 408 in its research report dated July 23, 2019.
Dolat Capital's research report on Zee Entertainment
The robust subscription revenue growth of 36.6% YoY is the key highlight of Zee’s healthy Q1FY20. Ad revenue growth was a marginal 3.6%, due to FTA channels becoming pay and NTO. Zee’s struggle and ambiguity due to promoter stake sale to bail out the Essel group since the past 6-8 months will likely end shortly. This itself may lead to rerating. Zee’s superior execution, industry leading growth, margins, and viewership share deserve higher multiple.
Outlook
However, the sharp deterioration in its BS/FCF in FY17-19 and lag in the digital business are constraints. Improvement in FCF and acceleration in the digital business are vital triggers. Accumulate, with TP of ` 408 at 20x FY21E EPS.
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