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Zee Entertainment (Buy, PO Rs145)
We forecast 6% YoY decline in ad revenue during FY12E, led by a decline in
sports-related business given the lack of significant events during the year.
We forecast about 13% YoY growth in ad revenue for FY13, led by a macroled
recovery in 2H FY13 and a likely higher allocation to the GEC genre
given the lower number of cricket days in FY13E vs. FY12E.
We expect EBITDA margins to expand by 300bp over FY11-13E to 30%, led
by lower sports-based losses and higher subscription income. EBITDA
margins ex sports stood at 36% 2Q FY12. Including sports margins stood at
27%.
Balance sheet is much healthy than in 2008. Net cash equivalent at Rs11bn
(2Q FY12) vs. 3.6bn at end-FY08. While Zee remains cautious on investing
in high celebrity-driven programming, it could effectively increase
programming hours and launch new programs to win back ratings. It has
been more active in 2H vs. 1H during the year.
Sports events are unlikely to surprise negatively even in FY13E given that
key cricket event, such as the India-South Africa series is scheduled to be
telecast in FY14E. Besides, with implementation of cable digitalization in
metro cities by June 2012 and cities with over one million-plus population by
March 2103, Zee could aim at higher subscription revenue for its cricket
properties. The sport business could potentially turnaround by FY14E/15E.
We retain our Buy with a PO of Rs145 at 19x FY13E PE and PEG of 0.8
(EPS CAGR 23% in FY12-14E). We see potential upside on higher
subscription revenue from digitalization and the recent tie-up with STAR to
form a distribution company.
Key risk: A continued deterioration in TV ratings for Zee TV, its flagship
channel, and a subdued ad-spend environment in FY13E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Zee Entertainment (Buy, PO Rs145)
We forecast 6% YoY decline in ad revenue during FY12E, led by a decline in
sports-related business given the lack of significant events during the year.
We forecast about 13% YoY growth in ad revenue for FY13, led by a macroled
recovery in 2H FY13 and a likely higher allocation to the GEC genre
given the lower number of cricket days in FY13E vs. FY12E.
We expect EBITDA margins to expand by 300bp over FY11-13E to 30%, led
by lower sports-based losses and higher subscription income. EBITDA
margins ex sports stood at 36% 2Q FY12. Including sports margins stood at
27%.
Balance sheet is much healthy than in 2008. Net cash equivalent at Rs11bn
(2Q FY12) vs. 3.6bn at end-FY08. While Zee remains cautious on investing
in high celebrity-driven programming, it could effectively increase
programming hours and launch new programs to win back ratings. It has
been more active in 2H vs. 1H during the year.
Sports events are unlikely to surprise negatively even in FY13E given that
key cricket event, such as the India-South Africa series is scheduled to be
telecast in FY14E. Besides, with implementation of cable digitalization in
metro cities by June 2012 and cities with over one million-plus population by
March 2103, Zee could aim at higher subscription revenue for its cricket
properties. The sport business could potentially turnaround by FY14E/15E.
We retain our Buy with a PO of Rs145 at 19x FY13E PE and PEG of 0.8
(EPS CAGR 23% in FY12-14E). We see potential upside on higher
subscription revenue from digitalization and the recent tie-up with STAR to
form a distribution company.
Key risk: A continued deterioration in TV ratings for Zee TV, its flagship
channel, and a subdued ad-spend environment in FY13E.
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