The Hindu Business Line
Zee Entertainment Enterprises (Reduce)
Zee Entertainment Enterprises Ltd is a media and entertainment company engaged in providing broadcasting services. The company operates through content and broadcasting segment. It offers content in multiple languages and offers approximately 38 international and over 30 domestic channels. The company has a library, housing over 2,22,703 hours of television content. The company holds rights to approximately 3,820 movie titles.
Zee Entertainment Enterprises (ZEEL) stock has stabilised after agreement with lenders of Essel Group not to revoke pledging till September 2019 and high probability that promoters will be selling stake to pay off creditors. We reinitiate coverage on ZEEL with a ‘reduce’ rating and revised target price of ₹391, valuing the stock at 21xFY20E P/E. Our key reasons for concern are: 1) ZEEL’s inability to sustain the surprisingly high growth in its domestic pay-TV revenues in 9MFY19; and 2) On-ground disruption with the new tariff order (NTO) coming into force. We have cut our advertising and subscription revenue estimates for FY20E and FY21E, resulting in 9 per cent reduction in earnings estimates for FY20E & FY21E.
We also argue that value of Zee Entertainment as an independent entity is less without the group ownership of distribution assets — Dish TV and Siti Network.