tech_genie
Member
- Joined
- 20 Sep 2012
- Messages
- 879
- Reaction score
- 697
SPA Research has come out with its report on Zee Entertainment Enterprises dated October 9, 2012. The research firm expects that Zee Entertainment is sitting on sweet spot and will be a major beneficiary of the digitisation wave with jump in subscription revenues and fall in carriage fees.
ZEE Entertainment Enterprises Ltd. (ZEE) is a leading broadcaster in India with bouquet of 30 channels across various genres. With few weeks left in digitization of cable networks in Metros, we met the management of the company to understand the overall benefits that would come to the company with digitization. Also, we wanted to get the managements views on ad-revenues growth scenario amid sluggish economic environment.
Digitization Impact:
On Revenues: anagement expects subscription revenues to get a boost from digitization but the benefit of overall increase in number of subscriber base would not exactly flow to the company. Since company stopped disclosing subscriber base post formation of Mediapro which deals with MSO's and DTH players on behalf of the company, it is difficult to estimate the exact increase in subscription revenues.
On Carriage Fees: Management expects fall in carriage fees but it would not be of significant proportion as company would be required to pay it for desired placement of their channel in a particular genre.
On EBIDTA Margin: Management plans to utilize increase in revenues for launching new media initiatives and investing in new contents to stay more competitive. ZEE expects to breakeven its sports business with the increase in subscription income by FY14-FY15. Company would like to maintain its EBIDTA margin in the range of 25-30%.”
Expect ad-revenues growth to be higher than industry:
Owing to sluggish economic environment, ad-revenues growth has come under pressure. However, management expects its adrevenues to grow faster than expected industry growth of 8-9% in FY13 on the back of increased GRPs (with higher investment in content) and lower base of previous year (ad-revenues de-grew by 7% in FY12). Company has further planned to increase its programming hours from 24hrs in Q1FY13 to 33hrs by Q4FY13 to garner higher GRPs that would drive ad-revenue growth.
TRAI ruling not to have significant impact:
TRAI in its recent regulation suggested restricting ad-inventory to maximum 12mins/hour. Though IBA (Indian broadcasters association) has challenged this order in court and the matter is sub-judice. Even in case of ruling coming against the company, the impact would not be significant as at present ad-inventory stands at ~13-14mins/hour.
Outlook and Valuation:
ZEE is one of the leading broadcasting companies with a bouquet of 30 channels across genres and languages. Continual investment in high quality content and increasing programming hours has catapulted company's flagship channel Zee TV to the number 2 Hindi GEC slot from number 4 last year. We feel that company is sitting on sweet spot and will be a major beneficiary of the digitisation wave with jump in subscription revenues (without incurring any additional cost) and fall in carriage fees. At CMP, ZEE is trading at 23x FY14E EPS.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Zee Ent to benefit most from digitization: SPA Research - Moneycontrol.com
ZEE Entertainment Enterprises Ltd. (ZEE) is a leading broadcaster in India with bouquet of 30 channels across various genres. With few weeks left in digitization of cable networks in Metros, we met the management of the company to understand the overall benefits that would come to the company with digitization. Also, we wanted to get the managements views on ad-revenues growth scenario amid sluggish economic environment.
Digitization Impact:
On Revenues: anagement expects subscription revenues to get a boost from digitization but the benefit of overall increase in number of subscriber base would not exactly flow to the company. Since company stopped disclosing subscriber base post formation of Mediapro which deals with MSO's and DTH players on behalf of the company, it is difficult to estimate the exact increase in subscription revenues.
On Carriage Fees: Management expects fall in carriage fees but it would not be of significant proportion as company would be required to pay it for desired placement of their channel in a particular genre.
On EBIDTA Margin: Management plans to utilize increase in revenues for launching new media initiatives and investing in new contents to stay more competitive. ZEE expects to breakeven its sports business with the increase in subscription income by FY14-FY15. Company would like to maintain its EBIDTA margin in the range of 25-30%.”
Expect ad-revenues growth to be higher than industry:
Owing to sluggish economic environment, ad-revenues growth has come under pressure. However, management expects its adrevenues to grow faster than expected industry growth of 8-9% in FY13 on the back of increased GRPs (with higher investment in content) and lower base of previous year (ad-revenues de-grew by 7% in FY12). Company has further planned to increase its programming hours from 24hrs in Q1FY13 to 33hrs by Q4FY13 to garner higher GRPs that would drive ad-revenue growth.
TRAI ruling not to have significant impact:
TRAI in its recent regulation suggested restricting ad-inventory to maximum 12mins/hour. Though IBA (Indian broadcasters association) has challenged this order in court and the matter is sub-judice. Even in case of ruling coming against the company, the impact would not be significant as at present ad-inventory stands at ~13-14mins/hour.
Outlook and Valuation:
ZEE is one of the leading broadcasting companies with a bouquet of 30 channels across genres and languages. Continual investment in high quality content and increasing programming hours has catapulted company's flagship channel Zee TV to the number 2 Hindi GEC slot from number 4 last year. We feel that company is sitting on sweet spot and will be a major beneficiary of the digitisation wave with jump in subscription revenues (without incurring any additional cost) and fall in carriage fees. At CMP, ZEE is trading at 23x FY14E EPS.
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Source: Zee Ent to benefit most from digitization: SPA Research - Moneycontrol.com
