Zee Leisure Enterprises’ (ZEEL) Q3FY21 advert income rise of seven.5% YoY was higher than anticipated, and content material syndication deal value Rs5.5bn led to a lot greater revenues. Advert revenues ought to proceed to learn from low base for subsequent 12 months. ZEEL is planning a 5-year development technique and speed up investments throughout TV (channels, and content material), digital (originals), and flicks (35-40 p.a.). This could affect near-term margins and FCF, therefore the corporate has withdrawn its margin/FCF steerage. It will disclose extra particulars in Q4FY21. We barely improve our EPS estimates by 6%/3% for FY21/FY22, and our goal worth to Rs278 (from Rs208) on valuation rollover to FY23E; and rise in PE a number of to 14x (from 12x). Downgrade to ADD (from Purchase), and await extra disclosures on investments.
– Accelerated Investments. ZEEL is working to speed up investments in: 1) digital (originals and flicks); 2) TV, notably revamping exhibits in a couple of markets in all probability to win market share again and launch a couple of extra channels; and three) film manufacturing – prone to speed up from 8-10 motion pictures p.a. to 35-40. This could affect margins for subsequent few years and drive greater working capital. Firm has withdrawn its steerage of no less than 50% ‘PAT to FCF’ for FY22 in addition to its EBITDA margin steerage of 30%.
– Advert revenues bounce again; low base to assist FY22 development charge: ZEEL’s home advert revenues have bounced again with 7.5% YoY development to Rs12.4bn. That is regardless of IPL, and TV business advert income decline of two% YoY (ex-IPL). This was helped by development in adverts by auto, FMCG, e-commerce, and durables. Stock utilisation has reached pre-Covid in primetime GECs, and pricing has additionally began reaching these ranges. As a thumb rule, 80-85% of advert income development is pushed by greater realisations.
– Content material syndication offers drive Rs5.5bn income: Subscription income grew 18% YoY to Rs8.4bn attributable to inclusion of music enterprise (earlier below different phase), whereas L2L development was 9.3%. Firm sees subscription income development to be muted on NTO 2.0 overhang; else it ought to develop at mid-teens pushed by rise in HD penetration, new channel launches, greater realisations and rising ZEE5 paying customers. Different gross sales grew >5x on content material syndication deal, the place ZEEL has bought a few of worldwide content material the place it’s cutting down, e.g. in Germany, Latin talking international locations, and many others. to aggregator, and has already acquired consideration.
– ZEE5 under-performed: ZEE5 revenues at Rs1.2mn, up 19% QoQ, is uninspiring contemplating the robust content material line-up, and enchancment in advert marketplace for catch-up exhibits. Its MAU rose 20.5% QoQ (web add 11.2mn) to 65.9mn, however DAU improve was simply 3.8% QoQ (web add 0.2mn). EBITDA loss barely dipped to Rs1.8bn. Firm believes launch of common exhibits on TV additionally drives important viewership on OTT, which may drive development in lively customers and advert revenues.
– Different highlights from earnings name. 1) ZEEL is devising a 5-year development technique with plans to seize time share and leisure share of customers throughout TV, digital and flicks. It plans to speed up investments to drive greater development in the long term; 2) it has already launched >200 exhibits and flicks on ZEE5; 3) firm sees 15-18% DAU conversion, which is equal business friends; 4) TV content material price per hour has been secure, whereas motion pictures, notably Hindi, have elevated; 5) although film manufacturing is a lower-margin enterprise in comparison with TV, administration stays assured of worthwhile scaling of the enterprise; 6) abroad mutual funding cost of Rs2.25bn has been acquired; 7) SugarBox capex ought to begin in FY22, and needs to be unfold throughout three years; 8) capex is seen at Rs2bn-2.5bn in core enterprise; and 9) Siti Community is placed on cash-and-carry foundation, and no new credit score has been prolonged. Dish TV continues on cost schedule, and had receivables Rs4.6bn (from Rs5bn in Q2FY21).
Shares of ZEE ENTERTAINMENT ENTERPRISES LTD. was final buying and selling in BSE at Rs.215.3 as in comparison with the earlier shut of Rs. 249.4. The overall variety of shares traded in the course of the day was 3551302 in over 34154 trades.
The inventory hit an intraday excessive of Rs. 252.7 and intraday low of 212. The online turnover in the course of the day was Rs. 791190435.