Geojit Gives 'Buy' Call To This Media Stock For 25% Upside, Revenue Grew To Rs 2,323 Cr

Stock Overview

Zee Entertainment closed this week at Rs 236.15 per share (CMP), it was opened at 238 per share. The stock felt turbulence today as it declined 1.77% from the previous close. The stock's Current market Price (CMP) is trading at Rs 69.35 per share above the 52week low per share levels. Its 52-week low is Rs 166.80 per share, whereas, the 52-week high is Rs 378.70 per share. The brokerage has estimated a target price of Rs 293 per share with 12 months investment period horizon.

According to the estimated Target Price and Current Market Price (CMP), the stock has the potential to jump by 25%. Data shows that the stock has experienced a continuous decline over the week, almost a decline of 8.24%. However, it has maintained its price over the month. It has given 7.86% positive returns in 1 year. While on 3 and 5 years, it has given negative returns of 31.39%, and 54.97%, respectively.

Strong regional content drives growth

In Q4FY22 Revenue grew 18.2% YoY to Rs. 2,323 crore, led by higher Subscription revenue(+6.4% YoY) and Other Sales(+781.3% YoY) due to higher theatrical revenue (Valimai, Bangarraju, The Kashmir files etc) although offset by lower Advertising revenue(-0.3% YoY) due to pressure of viewership softness and increased input prices restricting the FMCG ad spends. The company released 64 shows and movies (incl. 13 originals) during the quarter. The MAUs touched 104.8mn, an additional of 32.2mn yearly. In Q4FY22 ZMC Hindi movies acquired 50%+ new Hindi movie titles and the YouTube channel recorded 83mn. subscribers & 19.2bn views making it the 2nd largest music label. ZEE will continue making investments across FY23 also aims to expand movie production across Hindi, Tamil, Marathi and Punjabi languages.

Margins impacted due to increased marketing and content costs

EBITDA touched Rs. 487 crore. down 10% YoY due to increase in content, employee costs and marketing costs, despite EBITDA margins increasing to 20.9% (+656 bps YoY). Consequently, PAT de-grew by 34.0% YoY to Rs. 182 crore, hit by one-off Rs. 100 crore that included bonus to the employees, legal expenses around the merger etc.

Why should you buy this stock?

Progress on the Zee-Sony merger deal are on track, with the company awaiting approvals from exchanges, after which an application shall be filed with NCLT. The daily active users were 10.5mn with average watch time increased to 214 minutes/user. The company has a strong balance sheet with zero debt and shall participate in the Indian Premier League media rights e-auction. ZEE network's viewership share declined to 17.1% in Q4FY22 vs 17.3% in Q3FY22.

Suggests Buy for target price of Rs 293/Share

According to Geojit, "The company faced pressures due to viewership softness and input price pressure restricting the FMCG ad spend thereby muting advertisement revenue, but the company shows resilience supported by growing regional market share, continued content creation and increased investments across marketing & technology. Considering the positive outlook, we reiterate the BUY rating on the stock with a revised target price of Rs. 293 based on 18x FY24E adj. EPS."

About - Zee Entertainment Enterprise Ltd.

Zee Entertainment Enterprises Ltd, a subsidiary of Essel Group, is an Indian mass media company with interests in television, print, films, mobile content and internet, and allied businesses. Zee's strong global presence entertains over 1.3 billion viewers in more than 170 countries. Zee and its affiliate companies have a dominant presence across the media value chain, including television broadcasting, cable distribution, direct-to-home satellite services, digital media, and print media. The company operates in two segments: content and broadcasting. Over 260,000 hours of television content are housed in the company's library. Approximately 4,800 film titles are owned by the company.