Retain 'Buy' on Zee Entertainment- TP Rs.150 - Geojit BNP Paribas Financial Services Limited

'Buy' rating on Zee Entertainment is maintained with a target price of Rs.150 over one year.

There are no major surprises in the 3QFY12 numbers. It seems that strong subscription revenue has offset weak advertisement revenue.

The company has managed to reduce its sports losses, which enabled the company to improve yoy margin and it is on track to achieve its annual sports loss guidance.

Non-sports business was also weak due to economic slowdown and decline in viewership share.

Advertisement revenue is expected to remain low due to overall weak ad spends and decline in viewership for the flagship channel, Zee TV.

Subscription revenue has shown a healthy growth of 12% qoq and the strong growth in subscription revenue would continue. This would be the strong long term growth driver as the Indian government has passed the mandatory digitization.

Overall, the performance of the company was good in a difficult year and the 'buy' rating on the stock is maintained.

The target price is at 20 P/E of FY13 expected EPS.

While ad revenue would continue weak, subscription revenue would get a boost on digitization ordinance.

It will also benefit from monetizing pay – TV opportunities. Its declining sports losses would also support margins.

Failure to improve ratings of Zee TV and higher than expected weakness in advertisement revenue are downside risks to the target price.

Source : Equity Bulls

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