Zee Entertainment’s (Zee) Q1FY21 was all about management’s effort to address investors’ concerns on strategy, related party transaction, balance sheet. Results, as expected, were weak with ad revenues fall of ~65% YoY (domestic ad decline of 66.1%) given the lack of fresh content. Subscription growth of 5% YoY, primarily led by Zee5 growth, remained a solace. Higher-than-expected operational costs (purchase of licensed content, continued amortisation cost of movies, digital shows) and employee costs led to EBITDA at | 219.9 crore, down 66.7% YoY. EBITDA margin was at 16.8%, down 1609 bps YoY. Reported PAT was at | 30.4 crore, down 94.3% YoY.

Valuation & Outlook

Guidance for working capital improvement, improved governance, better disclosures is a positive change. Nonetheless, near term concerns such as ad outlook as well as potential implementation of NTO 2 remain. We will turn buyers once ad recovery, improved cash flows & overdue recovery from related parties (“walking the talk”) is seen. We do, however, increase our target multiple from 9x FY22 P/E to 11x FY22 P/E with a revised target price of | 195/share (| 150/share, earlier). Maintain HOLD rating on the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_ZeeEnt_Q1FY21.pdf

Shares of ZEE ENTERTAINMENT ENTERPRISES LTD. was last trading in BSE at Rs.173.95 as compared to the previous close of Rs. 169.9. The total number of shares traded during the day was 2630008 in over 15525 trades.

The stock hit an intraday high of Rs. 178.85 and intraday low of 165.3. The net turnover during the day was Rs. 454005267.

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