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Zee Entertainment shares jump 4% after modest Q4 results

LiveMint logoLiveMint 11-05-2017 Nasrin Sultana

Mumbai: Shares of Zee Entertainment Enterprises Ltd jumped 4.5% intraday on Thursday after it reported modest March quarter earnings with flat advertising revenue growth. However, the media company’s domestic advertising revenue growth was at 8.1% in Q4 but subscription revenues declined 6% (year-on-year) due to loss of revenues after it sold its sports business in February this year.

“Domestic advertising revenue was driven by monetisation of viewership gains in regional markets,” said Ambit Capital Pvt. Ltd. The brokerage firm said that the management guided for improving operating margins to over 30% versus 26-30% over FY14-16 while sustaining ahead of the industry growth.

In a 11 May report, it said that the company is also increasing fresh programming in its regional channels and acquisition of movie rights to telecast on its channels is a strategic move, capitalising on tepid market conditions. “We expect the company to maintain its high base of network viewership and factor in 10% advertising revenue growth in FY18,” Ambit added.

ICICI Securities Ltd said that advertising revenue growth is likely to be subdued in FY18 as the currently tepid ad spend environment is expected to continue and investments in Hindi GEC properties, Zee TV and &TV are still pending. “Pay-TV revenues are expected to witness an upward trajectory going forward with digitisation in phases-3&4 markets. However, pay-TV growth for FY18 might be a function of the acceptance of new tariff order regime and its implementation, which we expect to be delayed,” it added in a 11 May report. The brokerage firm has revised earnings per share (EPS) to Rs15.5 and Rs18.7 for FY18 and FY19, respectively.

Kotak Institutional Equities Research said that Zee’s strategy, continuous investments, execution on the profitability front and structural improvements augurs well. “Zee has stepped up investments in movies, a strategic move to further strengthen its network in entertainment genres post exit from sports,” Kotak said in a 11 May report. However, it added that if movies are bought at a steep price, it can dilute return on investments.

Edelweiss Research said that potential jump in advertising spends post goods and service (GST) implementation, sustained focus on regional markets, improvement in ad yields in free-to-air (FTA) markets and Phase III digitisation brighten prospects for Zee. “Investments in movies, digital and GECs will benefit Zee in the long term. However, uncertainty on implementation of the TV tariff order will remain an issue,” it said in a 10 May report.

At 12:31pm, Zee Entertainment Enterprises was quoting at Rs540.25, up Rs24.20, or 4.69% on the BSE, while the benchmark Sensex index rose 0.27% by 83.12 points to 30,331.29.

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