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Ad revenues up in festive season; new channels gain traction
Zee News (ZNL) reported revenues of INR 744 mn in Q3FY11 (ahead of our
estimate of INR 676 mn). Ad revenues grew 33% Q-o-Q to INR 542 mn; for
9mFY11, ad revenues were up 21.5% over 9mFY10 - impressive, considering the
latter was boosted by General Elections related ad spends. Subscription
revenues for Q3FY11, at INR 186 mn, were down 4% Q-o-Q as ZNL signed fixed
fee deal with Tata Sky.
EBITDA expands with lower new channel losses
EBITDA stood at INR 135 mn (against estimated INR 81 mn), up 92% Q-o-Q.
EBITDA margins for Q3FY11 stood at 18% against 11% in Q2FY11. The robust
EBITDA margin expansion was driven by programming and employee costs (as a
percentage of sales) going down 630bps and 340bps, respectively. SG&A
expenses (as a percentage of sales), however, increased 300bps Q-o-Q. The
existing channels, Zee News, Zee Business, Zee 24 Taas, Zee Punjabi, and 24
Ghanta, reported EBDITA of INR 225 mn and EBITDA margin of 32.6%. The new
channels, Zee News UP, Zee 24 Gantalu, and Zee Tamil, continued to report
operating loss of INR 91 mn (against INR 261 mn in Q2FY11).
PAT surges on the back of strong operating level performance
Q3FY11 reported PAT, at INR 62 mn (against our estimate of INR 31 mn), was
up from just INR 2 mn in Q2FY11, aided by the strong operating level
performance. Interest cost has dropped 26% Y-o-Y.
An all-round performance
Zee News, ZNL’s flagship channel, was No. 1 in the prime time slot in the top 8
metros. 24 Ghanta was No. 1 in Q3FY11 in the West Bengal news market, both
in terms of time spent per viewer and relative share. Zee Tamiz has been closing
in on the 100 GRP mark in the Tamil market. Other new channels, Zee 24
Gantalu and Zee News UP, have also enhanced their viewership shares in the
Andhra Pradesh and Uttar Pradesh/Uttarakhand markets, respectively.
Outlook and valuations: Good prospects; maintain ‘BUY’
We continue to prefer ZNL as a good pick in the news broadcasting space. It has
multiple growth drivers— strong bouquet of news channels, rising viewership,
strong management and overall improvement in the advertisement industry. We
expect it to be one of the key beneficiaries of the uptick in advertisement
spending and, hence, maintain our ‘BUY’ recommendation on the stock. On
relative return basis, we rate the stock ‘Sector Performer’.
Company Description
Zee News Limited is a leading news network of India. It has a unique cluster of news,
current affairs and regional news channels, which includes Zee News, Zee Business, Zee
Punjabi, Zee 24 Taas, Zee Tamizh, Zee 24 Gantalu and Zee News U.P
Investment Theme
With the nominal GDP growth expected to improve, the outlook on ad spends is expected
to improve. Also increasing digitization and higher penetration of DTH augur well for
faster growth in subscription revenues. ZNL’s news channel portfolio includes both
national and regional news channels, and together they form an exciting growth
segment. ZNL also has a strong presence in Hindi business news space. Also the
company benefits from being a part of the Zee Group enhancing its ability to market its
channels to advertisers and bargaining power with distributors.
Key Risks
• Slowdown in the Indian ad market
• Decline in popularity of channels
• Subscription revenue deal may take time to materialise
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Ad revenues up in festive season; new channels gain traction
Zee News (ZNL) reported revenues of INR 744 mn in Q3FY11 (ahead of our
estimate of INR 676 mn). Ad revenues grew 33% Q-o-Q to INR 542 mn; for
9mFY11, ad revenues were up 21.5% over 9mFY10 - impressive, considering the
latter was boosted by General Elections related ad spends. Subscription
revenues for Q3FY11, at INR 186 mn, were down 4% Q-o-Q as ZNL signed fixed
fee deal with Tata Sky.
EBITDA expands with lower new channel losses
EBITDA stood at INR 135 mn (against estimated INR 81 mn), up 92% Q-o-Q.
EBITDA margins for Q3FY11 stood at 18% against 11% in Q2FY11. The robust
EBITDA margin expansion was driven by programming and employee costs (as a
percentage of sales) going down 630bps and 340bps, respectively. SG&A
expenses (as a percentage of sales), however, increased 300bps Q-o-Q. The
existing channels, Zee News, Zee Business, Zee 24 Taas, Zee Punjabi, and 24
Ghanta, reported EBDITA of INR 225 mn and EBITDA margin of 32.6%. The new
channels, Zee News UP, Zee 24 Gantalu, and Zee Tamil, continued to report
operating loss of INR 91 mn (against INR 261 mn in Q2FY11).
PAT surges on the back of strong operating level performance
Q3FY11 reported PAT, at INR 62 mn (against our estimate of INR 31 mn), was
up from just INR 2 mn in Q2FY11, aided by the strong operating level
performance. Interest cost has dropped 26% Y-o-Y.
An all-round performance
Zee News, ZNL’s flagship channel, was No. 1 in the prime time slot in the top 8
metros. 24 Ghanta was No. 1 in Q3FY11 in the West Bengal news market, both
in terms of time spent per viewer and relative share. Zee Tamiz has been closing
in on the 100 GRP mark in the Tamil market. Other new channels, Zee 24
Gantalu and Zee News UP, have also enhanced their viewership shares in the
Andhra Pradesh and Uttar Pradesh/Uttarakhand markets, respectively.
Outlook and valuations: Good prospects; maintain ‘BUY’
We continue to prefer ZNL as a good pick in the news broadcasting space. It has
multiple growth drivers— strong bouquet of news channels, rising viewership,
strong management and overall improvement in the advertisement industry. We
expect it to be one of the key beneficiaries of the uptick in advertisement
spending and, hence, maintain our ‘BUY’ recommendation on the stock. On
relative return basis, we rate the stock ‘Sector Performer’.
Company Description
Zee News Limited is a leading news network of India. It has a unique cluster of news,
current affairs and regional news channels, which includes Zee News, Zee Business, Zee
Punjabi, Zee 24 Taas, Zee Tamizh, Zee 24 Gantalu and Zee News U.P
Investment Theme
With the nominal GDP growth expected to improve, the outlook on ad spends is expected
to improve. Also increasing digitization and higher penetration of DTH augur well for
faster growth in subscription revenues. ZNL’s news channel portfolio includes both
national and regional news channels, and together they form an exciting growth
segment. ZNL also has a strong presence in Hindi business news space. Also the
company benefits from being a part of the Zee Group enhancing its ability to market its
channels to advertisers and bargaining power with distributors.
Key Risks
• Slowdown in the Indian ad market
• Decline in popularity of channels
• Subscription revenue deal may take time to materialise
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