Prabhudas Lilladher's research report on Zee Entertainment Enterprises
ZEEL reported weak operational performance with EBITDA margin of 14.7% (PLe of 13.6%) due to 1) FTA withdrawal of ZEE Anmol 2) sluggish adenvironment and 3) continued investments in content and marketing (A&P spend at 15.6% of sales was at multi-year high while ZEE5’s EBITDA loss expanded sequentially to Rs2,769mn). We cut our EPS estimates by ~3-6% over FY23-FY25E as investment in content and marketing is likely to continue in order to build digital prowess. However, recovery in ZEEL’s viewership share by 30bps QoQ to 16.1% along with implementation of NTO 2.0 (deadline extended to Feb 2023 with an indication of no further delay) from FY24E is likely to result in sales/PAT CAGR of 10%/35% over FY23-FY25E. Further, impending merger with SPNI, a key re-rating lever, is likely to be culminated by FY23E resulting in revenue synergy of ~3-4%. In addition, cost synergies can manifest itself from employee rationalization, content sourcing and consolidation of backend infrastructure.
Outlook
We expect merger to go through by end of FY23E and retain BUY with a TP of Rs308 (22x Sep-24 EPS of merged entity; no change in target multiple).
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.