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India Equity Research Reports, IPO and Stock News
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Key Takeaways
Ad growth remains sluggish; festive season could drive a turnaround
Ad growth environment remains sluggish but could improve in 3QFY12, as advertisers
are likely to come back in the festive season.
Margin pressure for FMCG companies, led by higher raw material costs, and fatigue
post significant spends in cricket earlier this year led to cut in advertising, resulting
in flat ad revenue for Zee in 1QFY12.
Current visibility into the festive season remains low, but should improve by
September-end.
Investing in content and HD channels; course correction in 2HFY12 if ad growth
does not pick up
Zee has been investing in higher original programming hours per week for the
flagship channel, which will continue as planned unless there is no pick-up in ad
environment.
Sony has been giving tough competition to the flagship Zee TV for the number-3
slot. Zee is likely to continue investing in Hindi GEC as well as the regional space,
given strong competition.
Despite a 600bp cumulative decline in non-sports EBITDA margin over the past
three quarters, core business margin remains strong at ~35%.
Zee would also be launching HD channels by September-end and could be incurring
capex of ~INR550m and incremental opex of ~INR350m/year towards the same.
Sports business guidance maintained
After incurring a loss of INR0.57b in 1QFY12, the sports segment is likely to end
FY12 with a loss of ~INR1b.
Sports business had incurred a loss of INR2.1b in FY11.
Valuation and view
The stock trades at P/E of 18.8x FY12E and 16.2x FY13E earnings. Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Ad growth remains sluggish; festive season could drive a turnaround
Ad growth environment remains sluggish but could improve in 3QFY12, as advertisers
are likely to come back in the festive season.
Margin pressure for FMCG companies, led by higher raw material costs, and fatigue
post significant spends in cricket earlier this year led to cut in advertising, resulting
in flat ad revenue for Zee in 1QFY12.
Current visibility into the festive season remains low, but should improve by
September-end.
Investing in content and HD channels; course correction in 2HFY12 if ad growth
does not pick up
Zee has been investing in higher original programming hours per week for the
flagship channel, which will continue as planned unless there is no pick-up in ad
environment.
Sony has been giving tough competition to the flagship Zee TV for the number-3
slot. Zee is likely to continue investing in Hindi GEC as well as the regional space,
given strong competition.
Despite a 600bp cumulative decline in non-sports EBITDA margin over the past
three quarters, core business margin remains strong at ~35%.
Zee would also be launching HD channels by September-end and could be incurring
capex of ~INR550m and incremental opex of ~INR350m/year towards the same.
Sports business guidance maintained
After incurring a loss of INR0.57b in 1QFY12, the sports segment is likely to end
FY12 with a loss of ~INR1b.
Sports business had incurred a loss of INR2.1b in FY11.
Valuation and view
The stock trades at P/E of 18.8x FY12E and 16.2x FY13E earnings. Neutral
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