On the face of it, Zee has reported exceptionally good results for the first quarter of the current year; a 57.5% growth in the bottomline on a 13.7% growth in the topline. However, the other income, which has increased almost ten fold, forms more than 29% of the pre–tax profits of the company. The company has not provided for the details of the other income.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
Earnings per share*
Also, the increase in transmission cost due to Direct to Operator (DTO) service, the cost of the two new channels, Zee English and Zee Movies apart from the digitalisation of six of the group's channels does not seem to have been provided for in the table above. If we account for this, the net profit has actually declined by 25%!
Exceptional items written off *
Amortisation of film library
(sold to ATL last year)
Interest on syndicated loans
(raised for the library sell off)
Forex conversion loss
(advertising booked in India)
Increased transmission cost
(due to DTO service)
Cost of two new channels
Loss of two new subsidiaries
(E-connect and Zee Interactive)
*(in consolidated A/c's)
The stock quotes at Rs 458 which implies an earning multiple of 177 times. The earning multiple jumps to 378x if one were to provide for the expenses stated above. The stock looks distinctly overvalued.
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