- 21 Oct 2024
- ICICI Securities
ZEE ENTERTAINMENT: COST RATIONALISATION LED MARGIN EXPANSION CONTINUES
News: Zee Entertainment continued to report strong recovery in margins despite weak ad revenues. The ad revenues declined 7.9% YoY to ₹ 902 crore, owing to overall muted ad environment. The overall subscription revenues were up 9.2% YoY to ₹ 970 crore, aided by pricing benefits post NTO implementation as well Zee5 revenues. Overall Zee5 revenues at ₹ 236 crore, was down 11% YoY. EBITDA came in at ₹ 321 crore, with margins at 16% (up 239 bps YoY) aided by lower losses in Zee5 (loss of ₹ 159 crore in Q2FY25 vs. loss of ₹ 254 crore in Q2FY24). PAT was at ₹ 209 crore up 70% YoY, as base quarter had exceptional charge of ₹ 120 crore.
Views: The positive read through, during the quarter included a) reducing losses in Zee5, b) improvement of market share by 60 bps in H1FY25 to 17.4%, and c) management commentary of some festive led ad recovery signs from September, 2024. With merger called off, the company has embarked on improvement of margin (guided for FY26 margin of 18-20% with 8-10% revenue CAGR), albeit sustained revenue growth recovery amidst competition could be tough ask going ahead.
Impact: Positive