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ZEE NEWS
Good play on news broadcasting
Revenues below our estimate
Zee News reported revenues of INR 616 mn in Q2FY11, below our estimate of
INR 668 mn. Revenues were down 5% Q-o-Q, driven by 10% decline in ad
revenues that stood at INR 407 mn for the quarter. Subscription revenues for
Q2FY11 were at INR 194 mn, up 7.7% Q-o-Q.
EBITDA below our estimates; new channels continue to post losses
EBITDA stood at INR 70 mn (against estimated INR 84 mn), down 3.8% Q-o-Q.
Although SG&A expenses (as a percentage of sales) declined 660bps Q-o-Q,
programming and employee costs (as a percentage of sales) went up 548bps
and 225bps, respectively Q-o-Q. The existing news channels, Zee News, Zee
Business, Zee 24 Taas, Zee Punjabi, and 24 Ghanta, reported EBDITA of INR 187
mn and EBITDA margin of 32.3%. New channels, Zee News UP, Zee 24 Gantalu,
and Zee Tamil, reported operating loss of INR 261 mn.
PAT well below our estimate
Zee News’ Q2FY11 reported PAT was at INR 2 mn (much below our estimate of
INR 45 mn), down from INR 33 mn in Q1FY11 due to decline in other income,
higher interest expenses and higher tax provision on account of deferred tax
expense booked during the quarter.
New channel performance better
Zee 24 Gantalu has been improving its viewership position and is now third in
terms of time spent per viewer in primetime in the Andhra Pradesh news market.
Zee News UP channel was a front runner in the Uttar Pradesh news market in
terms of reach, time spent and share. 24 Ghanta was No. 1 in Q2 in the West
Bengal news market both in terms of time spent per viewer and relative share.
Outlook and valuations: Good prospects; maintain ‘BUY’
We continue to like Zee News as it will remain one of the good picks in the news
broadcasting market, post the restructuring. It has multiple growth drivers—
strong bouquet of news channels, rising viewership, strong management, and
overall improvement in the advertisement industry. We expect it to be one of the
key beneficiaries of the uptick in advertisement spending and, hence, maintain
our ‘BUY’ recommendation on the stock. On relative return basis, we rate the
stock ‘Sector Performer’.
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