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Zee Entertain an outperformer; target of Rs 315: SSKI

Tuesday, April 24, 2007

Zee Entertainment (ZEEL) has reported revenue growth of 31% in FY07 at Rs14.4bn. EBITDA margins are stable at 22% and PAT growth is at 12%. ZEEL’s continued journey up the rating chart and acquisition of Ten Sports has helped advertising growth at 32% and subscription revenue growth at 27%. Advertising growth in Q4FY07 has been subdued at 8% on account of shift in viewership towards KBC on Star and Cricket World Cup 2007. High content investments and losses on Zee Sports have restricted the EBITDA margins at FY06 levels of 22%.

ZEEL’s continued content investments are paying off as ZEEL now has 17-20 shows consistently featuring amongst Top 50. ZEEL continues to keep its content funnel on launching new shows at regular intervals and has 4-5 different properties featuring into Top 50. We believe that improved rating is now getting reflected in the advertising revenues, as ZEEL takes rack rate hikes and drives revenue growth at 18% CAGR over FY07-10. We also believe that ZEEL, a complete broadcast bouquet, stands to gain due to the changing distribution landscape. As we expect India to have 37m digital C&S households (DTH, CAS, IPTV) by 2010, we expect ZEEL’s domestic subscription revenues growing 3x to Rs10.3bn by FY10. We also expect margins to improve from 22% in FY07 to 33.7% in FY10, as yield on advertising revenues improve and subscription revenues start flowing in. We maintain our Out performer call and a price target of Rs 315. The only potential risk to ZEEL’s growth is increasing competition in the GEC space with launches from NDTV (headed by Sameer Nair); INX Media (Peter Mukherjea) and UTV.

Posted by FR at 4:34 PM  

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Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.