Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
COMPANY UPDATE
Zee Entertainment Enterprises (ZEE.BO)
Neutral Equity Research
Muted ad growth, margin pressure from content costs; still Neutral
What's changed
We remain Neutral on Zee with a revised 12-month DCF-based target price
of Rs125 (prev. Rs135, P/E-based). We change our valuation methodology
to DCF as we expect relatively stable cash generation going forward as Zee
expanded its channel portfolio in FY11 and now has a presence in almost
every genre. We reduce our TP as we cut our FY12E/FY13E revenue
estimates by 11.1%/7.6% after the company reported a 21% qoq decline in
ad revenues (in the recently announced 1Q results) and indicated a weak
outlook in the medium term. Zee now expects the TV advertisement
market to grow by a slower “single-digit” vs. the 12%-14% expected
earlier, largely as cricket events (World Cup and IPL) held at short intervals
have consumed a larger proportion of corporate ad budgets and as
macroeconomic growth slows. Subscription revenues, however, declined
a slower 1.8% in 1Q, led by strong uptake in DTH revenues (+12.5% qoq;
+55.9% yoy) and improving digitization. Management noted that EBITDA
margin declined by 610bps qoq due to lower revenues and higher costs
incurred in anticipation of a better ad spend environment. Zee expects
DTH traction to remain strong as the industry adds roughly 10mn subs/yr
and expects its JV (Media Pro) with Star (launched July 1) to offer a
bouquet of roughly 68 channels and to accrue benefits in the medium-tolong term.
Implications
We lower our FY12/13/14 EPS estimates for Zee by 21.1%/11.0%/7.7%,
primarily to reflect lower revenues and higher costs.
Valuation
We assume a WACC of 11.5% and a terminal growth rate of 3.5% in our 10-
yr DCF-based valuation to arrive at a 12m target price of Rs125.
Key risks
Upside: Sharp recovery in ad spend. Downside: Slower-than-expected
DTH uptake.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
COMPANY UPDATE
Zee Entertainment Enterprises (ZEE.BO)
Neutral Equity Research
Muted ad growth, margin pressure from content costs; still Neutral
What's changed
We remain Neutral on Zee with a revised 12-month DCF-based target price
of Rs125 (prev. Rs135, P/E-based). We change our valuation methodology
to DCF as we expect relatively stable cash generation going forward as Zee
expanded its channel portfolio in FY11 and now has a presence in almost
every genre. We reduce our TP as we cut our FY12E/FY13E revenue
estimates by 11.1%/7.6% after the company reported a 21% qoq decline in
ad revenues (in the recently announced 1Q results) and indicated a weak
outlook in the medium term. Zee now expects the TV advertisement
market to grow by a slower “single-digit” vs. the 12%-14% expected
earlier, largely as cricket events (World Cup and IPL) held at short intervals
have consumed a larger proportion of corporate ad budgets and as
macroeconomic growth slows. Subscription revenues, however, declined
a slower 1.8% in 1Q, led by strong uptake in DTH revenues (+12.5% qoq;
+55.9% yoy) and improving digitization. Management noted that EBITDA
margin declined by 610bps qoq due to lower revenues and higher costs
incurred in anticipation of a better ad spend environment. Zee expects
DTH traction to remain strong as the industry adds roughly 10mn subs/yr
and expects its JV (Media Pro) with Star (launched July 1) to offer a
bouquet of roughly 68 channels and to accrue benefits in the medium-tolong term.
Implications
We lower our FY12/13/14 EPS estimates for Zee by 21.1%/11.0%/7.7%,
primarily to reflect lower revenues and higher costs.
Valuation
We assume a WACC of 11.5% and a terminal growth rate of 3.5% in our 10-
yr DCF-based valuation to arrive at a 12m target price of Rs125.
Key risks
Upside: Sharp recovery in ad spend. Downside: Slower-than-expected
DTH uptake.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
No comments:
Post a Comment