X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Zee Ent : Lower taxes drive profits - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Zee Ent : Lower taxes drive profits
Jan 22, 2015

Zee Entertainment has announced its results for the third quarter of the financial year 2014-15 (3QFY15). The company has reported 15% YoY growth in sales and a 45% YoY growth in profit after tax. Here is our detailed analysis of the results.

Performance summary
  • Zee's sales grew by 15% YoY in 3QFY15.
  • The company's operating profit grew at a higher pace of 22% YoY.
  • Its tax rate fell significantly during the quarter.
  • Zee's bottomline grew a robust 45% YoY during 3QFY15.

Consolidated financial snapshot
(Rs m) 3QFY14 3QFY15 Change 9mFY14 9mFY15 Change
Net sales 11,884 13,637 14.8% 32,629 35,366 8.4%
Expenditure 8,976 10,104 12.6% 23,702 25,537 7.7%
Operating profit (EBDITA) 2,907 3,533 21.5% 8,927 9,830 10.1%
EBDITA margin (%) 24.5% 25.9% 1.4% 27.4% 27.8% 0.4%
Other income 380 802 110.8% 1,651 1,713 3.8%
Interest 32 28 -11.6% 88 73 -17.1%
Depreciation amortisation 135 170 26.0% 312 499 59.9%
Profit before tax 3,121 4,137 32.6% 10,179 10,971 7.8%
Exceptional items - -   - -  
Tax 985 1,072 8.8% 3,441 3,536 2.8%
Profit after tax before minority 2,136 3,065 43.5% 6,738 7,436 10.4%
Minority interest 0 (21)   (7) (32)  
Share of profit loss of associate - - - - - -
Profit after tax  2,136 3,086 44.5% 6,745 7,467 10.7%
Net profit margin (%) 18.0% 22.6%   20.7% 21.1%  
No. of shares (m)         960  
Basic reported earnings per share (Rs)         10.0  
P/E (x)*         38.0  
(*on a trailing twelve month basis)

What has driven performance in 3QFY15?
  • The growth in sales was driven by a whopping 268% YoY growth in revenues from other sales and services. Other sales and services includes syndication sales (pertaining to sports channels), play out & transmission services; and contributed about 13% to the total sales. Advertising revenues grew by 9% YoY. Subscription revenues on the other hand fell 2% YoY.

  • The company was successful in curtailing its overall operating costs, causing a rise in EBITDA margins from 24.5% in 3QFY14 to 25.9% in the quarter gone by. This has helped operating profit grow by 22%, faster than the pace of sales growth.

  • Other income for 3QFY15 grew by 111% YoY. Further, depreciation costs saw a sharp rise of 26% YoY. These factors, along with a big decline in effective tax rate together led to profit after tax growing by 45% YoY.

  • Domestic subscription revenues grew by almost 4% during the quarter. However, there are differences during the two periods due to accounting changes necessitated by a change in TRAI's content aggregator rules. Further, as far as international subscription revenues go, due to a change in arrangement with various operators across international regions, the reporting of subscription revenues for the current year has undergone a change and hence previous years' quarter's figures are not comparable with that of the current years'. As a result of these factors, the management has expressed that overall revenue figures too are not comparable with that of the previous year's quarter due to the above changes.

    Revenue Break up
    (% of sales) 3QFY14 3QFY15 Change 9mFY14 9mFY15 Change
    Advertising Revenue 6,843 7,426 8.5% 17,977 19,906 10.7%
    % sales 58% 54%   55% 56%  
    Subscription Revenue 4,565 4,461 -2.3% 13,387 12,827 -4.2%
    % sales 38% 33%   41% 36%  
    Other sales and services 476 1,750 267.9% 1,265 2,633 108.1%
    % sales 4% 13%   4% 7%  
What to expect?
Zee Entertainment has maintained its position of one of the leading GECs since years. As per the management, the economy has already begun showing signs of revival post the formation of the new government at the center and it expects the media industry to benefit from this improvement in overall economic environment. The recent rate cut by the Reserve Bank of India and improving macro indicators as a result of the fall in oil prices are further giving a fillip to business sentiment as per the management. It expects TV ad spends to improve in the forthcoming quarters and the overall television industry to grow faster than the recent past.

Though the digitization deadlines for Phase 3 and Phase 4 have been pushed back, the roll out of digitization is a positive development for the company and will provide it with new growth opportunities. While it will lead to fragmentation of audiences, the company is also looking at this as an opportunity to create new products for specific segments. The implementation of digitization in the remaining parts of the country is what the management expects will push the growth momentum further for the company.

At the current price of Rs 382, the stock is trading at 28.8 times our estimated FY17 earnings. Considering expensive valuations, we maintain a SELL recommendation on the stock at current levels.

To Read the Full Story, Subscribe or Sign In



DISCLOSURES UNDER SEBI (RESEARCH ANALYSTS) REGULATIONS, 2014
INTRODUCTION:
Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group.
BUSINESS ACTIVITY:
An independent research initiative, Equitymaster is committed to providing honest and unbiased views, opinions and recommendations on various investment opportunities across asset classes.
DISCIPLINARY HISTORY:
There are no outstanding litigations against the Company, it subsidiaries and its Directors.
GENERAL TERMS AND CONDITIONS FOR RESEARCH REPORT:
For the terms and conditions for research reports click here.
DETAILS OF ASSOCIATES:
  1. Quantum Information Services Private Limited (QIS) having its registered office at 103, Regent Chambers, Nariman Point, Mumbai 400021 is registered under SEBI (Investment Advisers) Regulations, 2013 vide Registration No. INA000000680. QIS provides information on mutual funds and personal financial planning, financial markets in general, and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services through its website www.personalfn.com
  2. Agora Holdings (Cyprus) Limited having its registered office at Akropolis, 59-61, 3rd Floor, Office 301 Strovolos 2012 Nicosia Cyprus belongs to Agro group (Agora) which owns www.agora-inc.com and is one of the largest and most successful consumer newsletter publishers in the world.
  3. Common Sense Living Private Limited (CSL) owns www.commonsenseliving.co.in and is an initiative that provides straightforward lifestyle and wealth-building ideas from wealth coach Mark Ford. CSL is 100% subsidiary Company of Equitymaster.
DISCLOSURE WITH REGARDS TO OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST:
  1. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any financial interest in the subject company.
  2. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one percent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.
  3. Neither Equitymaster, it's Associates, Research Analyst or his/her relative have any other material conflict of interest at the time of publication of the research report.
DISCLOSURE WITH REGARDS TO RECEIPT OF COMPENSATION:
  1. Neither Equitymaster nor it's Associates have received any compensation from the subject company in the past twelve months.
  2. Neither Equitymaster nor it's Associates have managed or co-managed public offering of securities for the subject company in the past twelve months.
  3. Neither Equitymaster nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  4. Neither Equitymaster nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither Equitymaster nor it's Associates have received any compensation or other benefits from the subject company or third party in connection with the research report.
GENERAL DISCLOSURES:
  1. The Research Analyst has not served as an officer, director or employee of the subject company.
  2. Equitymaster or the Research Analyst has not been engaged in market making activity for the subject company.
Definitions of Terms Used:
  1. Buy recommendation: This means that the investor could consider buying the concerned stock at current market price keeping in mind the tenure and objective of the recommendation service.
  2. Hold recommendation: This means that the investor could consider holding on to the shares of the company until further update and not buy more of the stock at current market price.
  3. Buy at lower price: This means that the investor should wait for some correction in the market price so that the stock can be bought at more attractive valuations keeping in mind the tenure and the objective of the service.
  4. Sell recommendation: This means that the investor could consider selling the stock at current market price keeping in mind the objective of the recommendation service.
Feedback:
If you have any feedback or query or wish to report a matter, please do not hesitate to write to us.

Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ZEE ENTERTAINMENT SHARE PRICE


Dec 12, 2017 03:33 PM

TRACK ZEE ENTERTAINMENT

  • Track your investment in ZEE ENTERTAINMENT with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON ZEE ENTERTAINMENT

ZEE ENTERTAINMENT 8-QTR ANALYSIS

COMPARE ZEE ENTERTAINMENT WITH

MARKET STATS