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Zee Entertainment Enterprises Ltd., incorporated in the year 1982, is a Large Cap company (having a market cap of Rs 17111.39 Crore) operating in Media & Entertainment sector.
Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 1312.03 Crore, down 32.75 % from last quarter Sales of Rs 1951.08 Crore and down 34.66 % from last year same quarter Sales of Rs 2008.12 Crore. The company reported net profit after tax of Rs 29.24 Crore in latest quarter.
Investment Rationale
The brokerage believes that Zee is taking the correct steps, by trying to improve its corporate governance policies. Improved disclosures, potential strengthening of the company’s board and the reporting of ZEE5 financials paint a positive picture. However, given the underperformance in the recent past, the brokerage awaits consistent delivery and transparency. The company is banking on ZEE5 to drive subscription growth, going forward. Management has guided for lower movie purchases and reduced working capital requirement in FY21. Given the hyper-competitive nature of the OTT space, it believes that it would continue to see investments for sustainable growth, especially with the presence of numerous global players. The first leg of multiple re-rating will happen along with the changes in Q1 and consistency in balance sheet improvement, with FCF generation providing further re-rating in the ensuing quarters. Underperformance in the past and balance sheet deterioration should fade away over time with consistent delivery. Key upside risks: 1) significant improvement in cash generation and balance sheet; 2) quicker-than-estimated ad revenue recovery; 3) sustained double-digit subscription revenue growth; and 4) monetization of ZEE5
Promoter/FII Holdings
Promoters held 4.8 per cent stake in the company as of June 30, 2020, while FIIs held 67.3 per cent, DIIs 9.7 per cent and public and others 18.2 per cent.
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