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Zee Entertainment
Enterprise Limited
1QF12: Not Many Surprises
Quick Comment – We maintain our EW rating on the
stock due to our view that a) advertising revenue trends
may remain sluggish in next 2-3 quarters, and b) there
may be some earnings downgrades on the Street. On
the other hand strong DTH revenue trends, the planned
share buyback and the healthy balance sheet should aid
the stock.
ZEEL clocked PAT of Rs1.3b, down 13% YoY and 32%
QoQ. EBITDA of Rs1.56b was 2% higher than MSe.
This was down 31% QoQ and 17% YoY. EBITDA
margin at 22.3% dropped 529bps YoY and 610 bps QoQ.
We highlight here that ZEEL management had been
guiding for weak results for 1QF12.
Highlights of the 1QF12 Result:
Ad revenues were flat YoY (MSe at 2%) at Rs3.78b.
Subs revs stood at Rs3.05b, down 2% QoQ and 17%
YoY. DTH revenues at Rs1.1b went up QoQ by a solid
12%, about 7% higher than our expectation, contributing
36% to total subscription revenues and 16% of total
revenues (about 12% in 4QF11).
Programming cost was Rs3.43b, MSe 49% of total
revenues. This may increase in next 2-3 quarters as
ZEEL strives to increase fresh programming from about
29 hours/week currently to about 34 hours by F12 end.
Tax rate of 23% was lower than our expectation of 30%
and hence the positive surprise for us.
Sports business losses were at about Rs566m (MSe
500m) due to high costs and lesser revenues associated
with the recently concluded India West Indies series.
Key takeaways from the post earnings call:
Advt growth rate (for the company as well as for the industry)
likely to be single digit in F12, though there is not much clarity
on this. By mid-end year the picture may get clearer. We are
assuming 10.3% for ZEEL.
Rebranding cost in the 1QF12 was about Rs210m, included in
programming costs.
ZEEL has about Rs14b of net cash (11% of market cap) at
June end.
ZEEL has about 18.5m DTH subscribers currently. The
industry is adding about 12m per annum.
Tax rate for the full year is likely to be about 31%. This is line
with our assumption.
ZEEL intends to invest more on regional channels. Recently it
has bounced back to the no. 1 position in Bangla market.
Cricket losses were at Rs566m but guidance of Rs1b loss for
F12 is still being maintained (we are assuming Rs1b loss).
International subscription revenues fell by 10% QoQ to
Rs976m largely due to sluggish performance from Europe and
the UK, as per the company. The US continues to see
sequential growth. We feel international subscription revenues
may move largely sideways from here.
The advertising market lull has been caused by reduced
spending from sectors like FMCG, financial services, telecom
and auto.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Zee Entertainment
Enterprise Limited
1QF12: Not Many Surprises
Quick Comment – We maintain our EW rating on the
stock due to our view that a) advertising revenue trends
may remain sluggish in next 2-3 quarters, and b) there
may be some earnings downgrades on the Street. On
the other hand strong DTH revenue trends, the planned
share buyback and the healthy balance sheet should aid
the stock.
ZEEL clocked PAT of Rs1.3b, down 13% YoY and 32%
QoQ. EBITDA of Rs1.56b was 2% higher than MSe.
This was down 31% QoQ and 17% YoY. EBITDA
margin at 22.3% dropped 529bps YoY and 610 bps QoQ.
We highlight here that ZEEL management had been
guiding for weak results for 1QF12.
Highlights of the 1QF12 Result:
Ad revenues were flat YoY (MSe at 2%) at Rs3.78b.
Subs revs stood at Rs3.05b, down 2% QoQ and 17%
YoY. DTH revenues at Rs1.1b went up QoQ by a solid
12%, about 7% higher than our expectation, contributing
36% to total subscription revenues and 16% of total
revenues (about 12% in 4QF11).
Programming cost was Rs3.43b, MSe 49% of total
revenues. This may increase in next 2-3 quarters as
ZEEL strives to increase fresh programming from about
29 hours/week currently to about 34 hours by F12 end.
Tax rate of 23% was lower than our expectation of 30%
and hence the positive surprise for us.
Sports business losses were at about Rs566m (MSe
500m) due to high costs and lesser revenues associated
with the recently concluded India West Indies series.
Key takeaways from the post earnings call:
Advt growth rate (for the company as well as for the industry)
likely to be single digit in F12, though there is not much clarity
on this. By mid-end year the picture may get clearer. We are
assuming 10.3% for ZEEL.
Rebranding cost in the 1QF12 was about Rs210m, included in
programming costs.
ZEEL has about Rs14b of net cash (11% of market cap) at
June end.
ZEEL has about 18.5m DTH subscribers currently. The
industry is adding about 12m per annum.
Tax rate for the full year is likely to be about 31%. This is line
with our assumption.
ZEEL intends to invest more on regional channels. Recently it
has bounced back to the no. 1 position in Bangla market.
Cricket losses were at Rs566m but guidance of Rs1b loss for
F12 is still being maintained (we are assuming Rs1b loss).
International subscription revenues fell by 10% QoQ to
Rs976m largely due to sluggish performance from Europe and
the UK, as per the company. The US continues to see
sequential growth. We feel international subscription revenues
may move largely sideways from here.
The advertising market lull has been caused by reduced
spending from sectors like FMCG, financial services, telecom
and auto.
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