Zee Entertainment Research Report By HDFC Sec

Zee’s 3QFY15 numbers were ahead of ours and consensus estimates. The company’s ad revenue growth continues to surprise positively, growing at 9% YoY with annual ex-sports ad revenue growth in the range of 12-16%. This was the key reason for EBITDA beat, which grew 22% YoY notwithstanding a sharper than expected sports loss of Rs 270mn. Consolidated net sales grew by 15% YoY, EBITDA by 22% and APAT by 28%.

We resume coverage with a BUY rating and TP of Rs 437 (32x FY17E EPS and a discount of Rs 16 on account of preference share payout). We believe that ZEEL is uniquely positioned to capitalize on (1) higher ad spends on account of improving GDP growth, incremental spends by FMCG and the emergence of new categories (2) digitization – ARPU upside from phase I and II areas as well as digitization of phase III/IV.

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