At 09:45 AM; ZEE quoted 3 per cent lower at Rs 212, as compared to 0.36 per cent rise in the S&P BSE Sensex. In past three months, the stock has declined 20 per cent, as against 1.4 per cent fall in the benchmark index. The stock had hit a 52-week low of Rs 200.50 on June 20, 2022.
ZEE’s overall revenues grew 6.7 per cent year-on-year (YoY) at Rs 2111.2 crore. Domestic advertisement revenue dropped 16 per cent, while overall expenses climbed more than 10 per cent to Rs 1,872 crore. The company said advertisement revenue YoY growth impacted due to FTA withdrawal (Zee Anmol) and slowdown in FMCG spends due to challenging macro-economic environment.
Subscription revenue YoY up 11.2 per cent, aided by underlying organic growth in Zee5, Zee Music and by recognition of subscription revenue from Siti network, the company said.
Ebitda (earnings before interest, taxes, depreciation, and amortization) came in at Rs 338 crore, decline of 18 per cent YoY basis and up 35 per cent QoQ, with margins at 16 per cent, down 482 bps YoY, up 243 bps QoQ.
According to ICICI Securities, going ahead, market share recovery in Marathi/ Tamil along with flagship Hindi channels where relative performance has been muted, will be the main thing to watch. “We expect gradual ad recovery from FY24, while likely merger consummation, remains key triggers (NCLT meeting on February 14, 2023),” the brokerage firm said in a note.
Analysts at Motilal Oswal Financial Services (MOFSL) lower their FY24 PAT estimate by 11 per cent due to a slower recovery in the ad market and continued investments. But the brokerage firm firmly believes the merged entity will have a strong competitive position in both linear and digital segments, which is not captured in the valuation. The NCLT’s decision on the lenders’ plea remains a key monitorable, MOFSL said.
Persistent weakness in ad revenue due to the inflationary environment, especially in the FMCG segment, continues to dampen revenue visibility of the segment. Ad revenue is expected to pick up from 2HFY23. The outlook on subscription revenue, however, is expected to improve with the implementation of NTO 3.0, the brokerage firm said.
Analysts believe stock trades at an attractive valuation of 18x FY24E P/E. This is a far cry from its historic multiples of 25-30x about three years back. The potential rerating will be governed by a recovery in the ad market, and the completion of the Sony deal, given the strong market position for the merged entity and the growth opportunity, they said.
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