Zee Entertainment Enterprises (ZEE.BO) Rs244.20
Strong beat on lower sports loss; core business stable News
Zee’s 1QFY14 EBITDA/PAT beat GSe by 15%/18% and Bloomberg
consensus by 13%/18% respectively. Revenues were largely in-line. PAT
beat was mainly due to lower than expected sports losses, that reduced
77% qoq, 55% yoy and were 73% below our estimates.
Results highlights: 1) Advertisement revenues grew 11% qoq (+19% yoy)
and were 12% above our estimates; Zee TV’s relative viewership share
remained largely stable at 18% (vs. 19% in 4QFY13). 2) Subscription
revenues, while up 17% yoy, were down 7% qoq (-7% vs. GSe), due to the
lumpy nature of content agreement finalization, in our view; 3) Core
EBITDA margin (adjusted for sports losses) improved 210 bps qoq and
came in at 35.1% higher than GSe of 33.6% mainly due to lower cost of
sales; 4) Even D&A was down 24% qoq (of low base).
Analysis
1) Zee’s healthy ad-revenue growth and stable share despite weakening
macro outlook and IPL series as revenues indicates a strong viewership
franchise and benefits of new content, in our view. 2) We now see potential
shrinking of consensus sports losses (modeling around Rs 870 mn, same
as last year) given materially lower sports losses in 1Q. This would likely
drive consensus upgrades for Zee, in our view; 3) International
subscription revenue growth disappointed with 6%/8% yoy/qoq decline
despite some INR depreciation benefits.
Implications
We maintain Neutral on Zee and put our estimates and target price under
review pending the conference call tomorrow (2:00 pm India time). We
continue to believe, among broadcasters, Zee remains a proxy for
digitization and expect increase in subscription revenue as revenues from
digitization start trickling-in in the coming quarters
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Strong beat on lower sports loss; core business stable News
Zee’s 1QFY14 EBITDA/PAT beat GSe by 15%/18% and Bloomberg
consensus by 13%/18% respectively. Revenues were largely in-line. PAT
beat was mainly due to lower than expected sports losses, that reduced
77% qoq, 55% yoy and were 73% below our estimates.
Results highlights: 1) Advertisement revenues grew 11% qoq (+19% yoy)
and were 12% above our estimates; Zee TV’s relative viewership share
remained largely stable at 18% (vs. 19% in 4QFY13). 2) Subscription
revenues, while up 17% yoy, were down 7% qoq (-7% vs. GSe), due to the
lumpy nature of content agreement finalization, in our view; 3) Core
EBITDA margin (adjusted for sports losses) improved 210 bps qoq and
came in at 35.1% higher than GSe of 33.6% mainly due to lower cost of
sales; 4) Even D&A was down 24% qoq (of low base).
Analysis
1) Zee’s healthy ad-revenue growth and stable share despite weakening
macro outlook and IPL series as revenues indicates a strong viewership
franchise and benefits of new content, in our view. 2) We now see potential
shrinking of consensus sports losses (modeling around Rs 870 mn, same
as last year) given materially lower sports losses in 1Q. This would likely
drive consensus upgrades for Zee, in our view; 3) International
subscription revenue growth disappointed with 6%/8% yoy/qoq decline
despite some INR depreciation benefits.
Implications
We maintain Neutral on Zee and put our estimates and target price under
review pending the conference call tomorrow (2:00 pm India time). We
continue to believe, among broadcasters, Zee remains a proxy for
digitization and expect increase in subscription revenue as revenues from
digitization start trickling-in in the coming quarters
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