The Hindu Business Line

Zee Entertainm­ent Enterprise­s (Reduce)


CMP: ₹418.1

Target: ₹391

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.

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