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Zee Entertainment
Growth trajectory to improve
„Growth trajectory expected to improve; Buy
While ZEEL’s 1Q ad revenue growth was muted, margin performance was better
than expected and reflects the diversified rev model i.e. strong subscription rev.
We expect earnings trajectory to improve from here on given 1) likely lower sport
losses for rest of the year, 2) revival in ad growth during 2H driven by onset of
festive season and 3) continued momentum in subscription revs. While we cut
earnings for FY12E and FY13E by ~ 5% to factor lower ad growth, PO is retained
on roll forward to FY13E.
1Q : Muted ad growth, strong margin performance
While we had anticipated pull back in ad spends for 1Q, ad growth for ZEEL was
muted and much lower than our expectation of 9% yoy growth. Recurring margins
however stood at 25% vs. BofAMLe 23%, despite higher sport losses during the
quarter and was helped by higher subscription revs. Reported margin stood at
23% and included one-off costs for rebranding expenses. Ex-sports EBITDA
margins stood at 38% up 100bp yoy, impressive given weak ad growth. ZEEL
reported sports losses of Rs566mn and retained its guidance of full year loss of
Rs1bn vs Rs2bn reported in FY11.
Subscription grew 17%; upside likely
Subscription revenues (44% revs) grew 17% yoy driven by 8% growth in domestic
subscription and 56% yoy growth in DTH revenues. Management highlighted that
its JV with Star for cable distribution is now operational and it expects domestic
subscription revenues to increase over next 2-3 quarters.
Balance sheet further improves; share buyback to commence
Balance sheet remains healthy with net cash balance at Rs13.9bn (Rs14/share).
An earlier announced share buyback is likely to commence this month.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Zee Entertainment
Growth trajectory to improve
„Growth trajectory expected to improve; Buy
While ZEEL’s 1Q ad revenue growth was muted, margin performance was better
than expected and reflects the diversified rev model i.e. strong subscription rev.
We expect earnings trajectory to improve from here on given 1) likely lower sport
losses for rest of the year, 2) revival in ad growth during 2H driven by onset of
festive season and 3) continued momentum in subscription revs. While we cut
earnings for FY12E and FY13E by ~ 5% to factor lower ad growth, PO is retained
on roll forward to FY13E.
1Q : Muted ad growth, strong margin performance
While we had anticipated pull back in ad spends for 1Q, ad growth for ZEEL was
muted and much lower than our expectation of 9% yoy growth. Recurring margins
however stood at 25% vs. BofAMLe 23%, despite higher sport losses during the
quarter and was helped by higher subscription revs. Reported margin stood at
23% and included one-off costs for rebranding expenses. Ex-sports EBITDA
margins stood at 38% up 100bp yoy, impressive given weak ad growth. ZEEL
reported sports losses of Rs566mn and retained its guidance of full year loss of
Rs1bn vs Rs2bn reported in FY11.
Subscription grew 17%; upside likely
Subscription revenues (44% revs) grew 17% yoy driven by 8% growth in domestic
subscription and 56% yoy growth in DTH revenues. Management highlighted that
its JV with Star for cable distribution is now operational and it expects domestic
subscription revenues to increase over next 2-3 quarters.
Balance sheet further improves; share buyback to commence
Balance sheet remains healthy with net cash balance at Rs13.9bn (Rs14/share).
An earlier announced share buyback is likely to commence this month.
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