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4QFY11 Results
Zee Entertainment’s 4QFY11 pre-exceptional profit of Rs1.94bn was up
70% QoQ on revenue increasing by a better-than-expected 6% QoQ and
23% YoY, and a 85% QoQ reduction in its sports business losses.
Advertising revenue was a surprise, increasing 9%QoQ, aided by an
improving ad environment and the strength of a 20-plus channel network.
While DTH revenues were up 20%QoQ and 44%YoY. Despite a surprising
improvement in advertising sales, we maintain our revenue and Ebitda
estimates to factor in a sports business loss significantly ahead of
management guidance, and anticipate earnings growth of 19% over
FY12-13. We reiterate our BUY call.
Sports business and ad revenue surprised.
Zee’s 4QFY11 operating revenue of Rs7.98bn improved 6% QoQ and 23% YoY
on a positive surprise in its sports business, and was 13% ahead of
expectations. Zee has been consolidating its regional channels since 4QFY10,
hence quarterly numbers are comparable on a YoY basis. A strong coreoperating
performance saw advertising improve 9% QoQ and 36% YoY,
despite stiff competition from peers and the company’s non-involvement in
the Cricket World Cup mega-event. Along with higher-than-expected other
income and lower taxation, Zee’s ability to confine its sports business loss to
Rs152m, an 85% reduction QoQ, triggered 4Q profit to jump 70% QoQ and
52% YoY, and consolidated Ebitda margin to improve 8ppt QoQ to 28%. We
maintain our revenue and Ebitda forecasts on factoring in the company’s
sports business loss significantly ahead of management guidance,
although improving from Rs2.1bn in FY11 to Rs2-1.9bn in FY12-13CL.
DTH remains key driver of subscription revenue.
On the back of industry DTH (direct-to-home) subscribers increasing to 33m,
Zee’s quarterly domestic distribution revenue of Rs2.02bn was up 12% QoQ
and 35% YoY on a resultant 24% YoY improvement in overall subscriptions to
Rs3.1bn. International revenue rose 7% QoQ on Zee’s globalisation of its
regional channels and consolidating operations. In turn, DTH led domestic
distribution revenue, with collections up 20% QoQ and 44% YoY to Rs984m,
despite pressure on its per-subscriber realisation. Cable revenue climbed 5%
QoQ and 27% YoY, experiencing slower growth due to the rise of DTH
subscribers. Meanwhile, the government has released fresh proposals for a
digitalisation sunset date of 31 March 2012 in four metros, and pan-India
implementation by 31 December 2014.
Earnings should grow 19% over FY12-13CL.
Despite our higher-than-guided sports business loss estimate, we expect
Zee’s FY12-13CL earnings to grow at an average 19% YoY, led by its
advertising upturn and ongoing DTH services boom. We maintain our BUY call
on balance sheet improvement to net cash of Rs12.5bn, which should enable
rising dividends.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QFY11 Results
Zee Entertainment’s 4QFY11 pre-exceptional profit of Rs1.94bn was up
70% QoQ on revenue increasing by a better-than-expected 6% QoQ and
23% YoY, and a 85% QoQ reduction in its sports business losses.
Advertising revenue was a surprise, increasing 9%QoQ, aided by an
improving ad environment and the strength of a 20-plus channel network.
While DTH revenues were up 20%QoQ and 44%YoY. Despite a surprising
improvement in advertising sales, we maintain our revenue and Ebitda
estimates to factor in a sports business loss significantly ahead of
management guidance, and anticipate earnings growth of 19% over
FY12-13. We reiterate our BUY call.
Sports business and ad revenue surprised.
Zee’s 4QFY11 operating revenue of Rs7.98bn improved 6% QoQ and 23% YoY
on a positive surprise in its sports business, and was 13% ahead of
expectations. Zee has been consolidating its regional channels since 4QFY10,
hence quarterly numbers are comparable on a YoY basis. A strong coreoperating
performance saw advertising improve 9% QoQ and 36% YoY,
despite stiff competition from peers and the company’s non-involvement in
the Cricket World Cup mega-event. Along with higher-than-expected other
income and lower taxation, Zee’s ability to confine its sports business loss to
Rs152m, an 85% reduction QoQ, triggered 4Q profit to jump 70% QoQ and
52% YoY, and consolidated Ebitda margin to improve 8ppt QoQ to 28%. We
maintain our revenue and Ebitda forecasts on factoring in the company’s
sports business loss significantly ahead of management guidance,
although improving from Rs2.1bn in FY11 to Rs2-1.9bn in FY12-13CL.
DTH remains key driver of subscription revenue.
On the back of industry DTH (direct-to-home) subscribers increasing to 33m,
Zee’s quarterly domestic distribution revenue of Rs2.02bn was up 12% QoQ
and 35% YoY on a resultant 24% YoY improvement in overall subscriptions to
Rs3.1bn. International revenue rose 7% QoQ on Zee’s globalisation of its
regional channels and consolidating operations. In turn, DTH led domestic
distribution revenue, with collections up 20% QoQ and 44% YoY to Rs984m,
despite pressure on its per-subscriber realisation. Cable revenue climbed 5%
QoQ and 27% YoY, experiencing slower growth due to the rise of DTH
subscribers. Meanwhile, the government has released fresh proposals for a
digitalisation sunset date of 31 March 2012 in four metros, and pan-India
implementation by 31 December 2014.
Earnings should grow 19% over FY12-13CL.
Despite our higher-than-guided sports business loss estimate, we expect
Zee’s FY12-13CL earnings to grow at an average 19% YoY, led by its
advertising upturn and ongoing DTH services boom. We maintain our BUY call
on balance sheet improvement to net cash of Rs12.5bn, which should enable
rising dividends.
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