‘buy’ Zee Entertainment – Target Price Rs.150

 Buy rating on Zee Entertainment is maintained with a target price of Rs.150 over one year. The stock is currently traded at Rs.112 range.
 2QFY12 revenue has been lower as expected. However, EBITDA has beaten market
expectation because of lower costs.
 Advertising revenue declined by 4% yoy on weak ad spends, lower rating and lower sports
contribution. Subscription revenue also missed estimates due to accounting change.
 EBITDA margin has beaten market forecasts because of lower sports losses, accounting
change and cost efficiencies.
 Zee has lost viewership share in three of its key channels - Zee TV, Zee Cenema and Zee
Marathi. To counter this, Zee is increasing its programming hours on Zee TV and is looking
more aggressive in movie acquisition. This along with lower ad spend may impact near term
margins.
 However, subscription revenue will be benefited from digitization.
 Better subscription revenue and lower sports losses are expected to aid profitability of the company.
 Based on these assumptions, buy call on Zee Entertainment is maintained with a target price of Rs.150 over one year.
 At the current price of Rs.112 range, the stock is traded at 17.5 P/E of FY12 expected earnings and at 14.8 P/E of FY13 expected earnings.