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Zee Entertainment reports weak performance in Q1FY23; ad recovery likely in H2

ICICIdirect Research 16 Aug 2022 DISCLAIMER

What’s Buzzing:

The performance of Zee entertainment was weak with modest ad growth and decline in margins.


Zee reported domestic ad growth of ~6% YoY as it faced dual pressure of viewership softness due to Zee Anmol exit from free to air (FTA) and lower time spent per viewers) and input price pressure restricting the FMCG ad spend. Overall subscription revenues declined 5% YoY largely owing to ~7% decline in domestic subscription owing to pricing embargo impacting TV subscription growth along with some impact by timing of some B2B deals and renewals. Zee5’s revenues were at Rs 159.7 crore during the quarter, growth of 43% YoY, driven by strong content slate addition. EBITDA margins at 12.8% was down 661 bps QoQ, due to lower revenues and higher marketing cost on a YoY basis, on account of new launches in linear business and continued investments in ZEE5. The company reported PAT of Rs 106.6 crore, down 50% YoY.

Our Perspective:

The silver lining was that adjusted for FTA exit impact, viewership share was better QoQ. Despite near term headwinds, the company expects QoQ improvement from Q2FY23 with major ad recovery from Q3FY23 led by festive season. We expect ~10.9% CAGR in ad revenues in FY22-24E, with growth recovery from Q3FY23 with festive season kicking in. The rebound in market share in Hindi GEC and Marathi/Tamil will be key to overall market share and ad recovery. Strong ad recovery from H2 and likely merger consummation (with Sony) with no visible impediment, remain key triggers in the medium term.

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