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Zee Entertainment:: Q3FY11 Update
Result below expectation
ZEEL reported Q3FY11 results below our estimates at
Rs8.25bn including Rs 700 million in one time fees for
premature termination of sporting event rights.
Excluding this, revenue growth was mere 6.1% QoQ and
3.2% above our estimates. EBIDTA was most
disappointing at Rs1.54bn excluding one time revenue
and was down 18.2% QoQ and 21% below our estimates
of Rs1.95bn.
Sports business plays spoilsport: Sports business
posted a loss of Rs1030mn for Q3FY11 excluding one
time revenue and loss of Rs1926mn for 9MFY11, much
ahead of our estimates and of the street. Loss was on
account of the high acquisition cost of the India –South
Africa cricket series. We believe losses would continue
to be high in Q4FY11 due to this series and the sports
business will not breakeven even in FY12.
Core business remains strong: Margins for the core
business continued to be healthy at 39% for the
quarter on the back of strong advertising revenue
growth at 6.7% QoQ.
Maintain HOLD; downgrade estimates: We have
marginally upgraded our FY11 estimates on account of
the one time revenue, but downgraded our FY12 and
FY13 estimated by 1%. We maintain HOLD rating on
the stock and reduce the target price to Rs139 from
Rs147 and target multiple to 19x on the back of
increasing uncertainty on the sports business, slippage
in rating on its flagship channel and margin pressure.
Result below expectations
ZEEL reported Q3FY11 results below our estimates. Revenue was at Rs8249mn including Rs 700
million as one time fees for premature termination of sporting event rights. Excluding this,
revenue growth was mere 6.1% QoQ and 3.2% above our estimates. YoY comparison is not
possible due to the merger of RGEC from Q4FY10, merger of ETC, acquisition of 9X and demerger
of education business.
EBIDTA was most disappointing at Rs1541mn excluding one time revenue and was down 18.2%
QoQ and 21% below our estimates of Rs1950 mn. We believe losses in the sports business
dampened the results whereas the core entertainment business remained strong with non-sports
margins at 39%.
Sports business plays a spoilsport
Sports business posted a loss of Rs1030mn for Q3FY11 excluding one time revenue and the loss of
Rs1926mn for 9MFY11 much ahead or our estimates and of and street. Management maintained
that the loss was on account for the high acquisition cost of the India –South Africa cricket series
and because they could not monetise this as the launch of the new channel Ten Cricket was
delayed by 6 months. We believe losses would continue to be high in Q4FY11 on account of this
series and the sports business will not breakeven even in FY12.
Core business remains strong
Margins for the core business continued to be healthy at 39% for the quarter on the back of strong
advertising revenue growth at 6.7% QoQ. However, we believe going forward with slippage in
rating for the flagship channel and high content and movie acquisition cost the margins could
remain subdued.
Steady decline in market share for flagship channel, Zee TV
ZEEL flagship general entertainment channel, Zee TV has steadily lost market share and is
currently at ~14.5% in Q3FY11 compared to 18% in Q2FY11 and 20% in Q4FY10. On GRP basis the
channel for the last 3 months has been averaging at 200 GRP compared to 240 in Q2FY11 and 263
in Q4FY10. Sony TV has steadily gained its share and for some weeks overtaken Zee TV which we
believe is a matter of concern as this has happened for the first time in the last 4 years. Leaders,
Star Plus and Colors have moved way ahead of Zee TV and have currently been having average
GRP of 370 and 275 respectively for last 13 weeks.
Subscription revenues grow by 3% QoQ
DTH subscription revenues grew by 4.3% QoQ to Rs821mn whereas domestic analog subscription
revenue was up by 2.6% at Rs986mn. International subscription revenues too was high by 2% at
Rs1011mn
Maintain hold, estimates changed
We have marginally upgraded our FY11 estimates on account for the one time revenue, but
downgraded our FY12 and FY13 estimates by 1%. We maintain HOLD rating on the stock and
reduce the target price to Rs139 from Rs147 and our multiple to 19x on the back of increasing
uncertainty on the sports business, slippage in rating on flagship channel and margin pressure.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Zee Entertainment:: Q3FY11 Update
Result below expectation
ZEEL reported Q3FY11 results below our estimates at
Rs8.25bn including Rs 700 million in one time fees for
premature termination of sporting event rights.
Excluding this, revenue growth was mere 6.1% QoQ and
3.2% above our estimates. EBIDTA was most
disappointing at Rs1.54bn excluding one time revenue
and was down 18.2% QoQ and 21% below our estimates
of Rs1.95bn.
Sports business plays spoilsport: Sports business
posted a loss of Rs1030mn for Q3FY11 excluding one
time revenue and loss of Rs1926mn for 9MFY11, much
ahead of our estimates and of the street. Loss was on
account of the high acquisition cost of the India –South
Africa cricket series. We believe losses would continue
to be high in Q4FY11 due to this series and the sports
business will not breakeven even in FY12.
Core business remains strong: Margins for the core
business continued to be healthy at 39% for the
quarter on the back of strong advertising revenue
growth at 6.7% QoQ.
Maintain HOLD; downgrade estimates: We have
marginally upgraded our FY11 estimates on account of
the one time revenue, but downgraded our FY12 and
FY13 estimated by 1%. We maintain HOLD rating on
the stock and reduce the target price to Rs139 from
Rs147 and target multiple to 19x on the back of
increasing uncertainty on the sports business, slippage
in rating on its flagship channel and margin pressure.
Result below expectations
ZEEL reported Q3FY11 results below our estimates. Revenue was at Rs8249mn including Rs 700
million as one time fees for premature termination of sporting event rights. Excluding this,
revenue growth was mere 6.1% QoQ and 3.2% above our estimates. YoY comparison is not
possible due to the merger of RGEC from Q4FY10, merger of ETC, acquisition of 9X and demerger
of education business.
EBIDTA was most disappointing at Rs1541mn excluding one time revenue and was down 18.2%
QoQ and 21% below our estimates of Rs1950 mn. We believe losses in the sports business
dampened the results whereas the core entertainment business remained strong with non-sports
margins at 39%.
Sports business plays a spoilsport
Sports business posted a loss of Rs1030mn for Q3FY11 excluding one time revenue and the loss of
Rs1926mn for 9MFY11 much ahead or our estimates and of and street. Management maintained
that the loss was on account for the high acquisition cost of the India –South Africa cricket series
and because they could not monetise this as the launch of the new channel Ten Cricket was
delayed by 6 months. We believe losses would continue to be high in Q4FY11 on account of this
series and the sports business will not breakeven even in FY12.
Core business remains strong
Margins for the core business continued to be healthy at 39% for the quarter on the back of strong
advertising revenue growth at 6.7% QoQ. However, we believe going forward with slippage in
rating for the flagship channel and high content and movie acquisition cost the margins could
remain subdued.
Steady decline in market share for flagship channel, Zee TV
ZEEL flagship general entertainment channel, Zee TV has steadily lost market share and is
currently at ~14.5% in Q3FY11 compared to 18% in Q2FY11 and 20% in Q4FY10. On GRP basis the
channel for the last 3 months has been averaging at 200 GRP compared to 240 in Q2FY11 and 263
in Q4FY10. Sony TV has steadily gained its share and for some weeks overtaken Zee TV which we
believe is a matter of concern as this has happened for the first time in the last 4 years. Leaders,
Star Plus and Colors have moved way ahead of Zee TV and have currently been having average
GRP of 370 and 275 respectively for last 13 weeks.
Subscription revenues grow by 3% QoQ
DTH subscription revenues grew by 4.3% QoQ to Rs821mn whereas domestic analog subscription
revenue was up by 2.6% at Rs986mn. International subscription revenues too was high by 2% at
Rs1011mn
Maintain hold, estimates changed
We have marginally upgraded our FY11 estimates on account for the one time revenue, but
downgraded our FY12 and FY13 estimates by 1%. We maintain HOLD rating on the stock and
reduce the target price to Rs139 from Rs147 and our multiple to 19x on the back of increasing
uncertainty on the sports business, slippage in rating on flagship channel and margin pressure.
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