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Zee Ent : Ads, subscriptions spur growth
Apr 20, 2011

Zee Entertainment has announced its 4QFY11 results. The company has reported 23% YoY and 43% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline grew 22.9% YoY during the quarter. For the year ended March 2011, revenues grew by 37% YoY.
  • Operating margins remained at the same levels as last year at 28.4%. For the year ended March 2011, the margins declined by 0.5%YoY.
  • Other income declined 21.7% YoY during the quarter. For the full year, it declined by 32.3% YoY.
  • Net income increased 43.3% YoY in the current quarter on the back of strong top line performance and overall margins increased to 23.6% during the quarter from 20.2% in the same period last year. For the full year, there was a decline of 7% YoY.


Financial performance snapshot
(Rs m) 4QFY10 4QFY11 Change FY10 FY11 Change
Sales 6,493 7,980 22.9% 21,998 30,114 36.9%
Expenditure 4,657 5,711 22.7% 15,863 21,849 37.7%
Operating profit (EBDITA) 1,836 2,268 23.5% 6,135 8,265 34.7%
Operating profit margin (%) 28.3% 28.4% 0.1% 27.9% 27.4%  
Other income 291 228 -21.7% 1,220 826 -32.3%
Interest 110 23 -79.1% 331 102 -69.2%
Depreciation 56 68 20.5% 285 263 -7.7%
Profit before tax 1,961 2,406 22.7% 6,738 8,725 29.5%
Extraordinary inc/(exp) 0 131   0 -197  
Tax 673 356 -47.0% 572 2,685 369.1%
Minority Interest -25 36 -241.7% 195 119 -38.9%
Profit after tax/(loss) 1,313 1,882 43.3% 5,970 6,118 2.5%
Net profit margin (%) 20.2% 23.6% 3.4% 27.1% 20.3% -6.8%
No. of shares (m)         978  
Basic & diluted earnings per share (Rs)*         6.0  
P/E ratio (x) *         22.4  
* On a trailing 12-months basis

What has driven performance in 4QFY11?
  • Zee Entertainment witnessed a 22.9% YoY growth during the quarter led by strong growth in the advertising segment. Advertising revenue increased 36.4% YoY due to higher channel shares across network, a buoyant macro environment and a continued preference of advertisers towards television. Subscription segment also displayed a healthy growth of 23.7% YoY. Revenues from ‘Other sales and services' segment, however, fell. . This was mainly due to discontinuation of revenue from education business of ETC.

    Revenue Break up
      4QFY10 4QFY11 Change FY10 FY11 Change
    Advertising Revenue 3517 4797 36.4% 10670 17085 60.1%
    % of sales 54.2% 60.1%   48.5% 56.7%  
    Subscription Revenue 2513 3107 23.7% 9869 11276 14.3%
    % of sales 38.7% 38.9%   44.9% 37.4%  
    Other Sales & Services 463 76 -83.6% 1459 1753 20.1%
    % of sales 7.1% 1.0%   6.6% 5.8%  

  • Operating margins remained stable at 28%. The programming expenses increased 43% YoY, rising from 40% in 4QFY10 to 47% YoY in the current quarter (as a percentage of sales). Selling and administrative expenses declined by 15% over the same period last year offsetting this increase thereby ensuring that operating margins remained at around the same levels as in the corresponding quarter last year.

  • Net income increased 43.3% YoY in the current quarter on the back of strong growth in top line and operating profits. Reduction in interest costs and lower tax expenses also helped bolster the bottomline. Thus, overall margins increased to 23.6% during the quarter from 20.2% in the same period last year. For the full year, however, there was a decline of 7% YoY.

  • The company’s flagship channel Zee TV recorded average channel share of 23% (vs. 19% last quarter) and average weekly Gross Rating Points (GRPs) of 217. The channel delivered an average 24 of the top 100 weekly shows in the quarter.

  • Please note that the current quarter results include financials of merged regional general entertainment channel business, ETC and 9x undertakings. Hence, the performance can’t be compared with the prior periods on an apple to apple basis.

What to expect?
At the current price of Rs 134, the stock is valued at 22 times FY11 earnings. We are in the process of revising our estimates and will update our research report on the company soon.

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