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Friday, April 22, 2011

Zee Ent beats Street, Goldman upgrades price, margin targets


This story first appeared in DNA Money editon on Wednesday April 20, 2011.

Zee Entertainment Enterprises Ltd on Tuesday said consolidated net profit for January-March rose a street-beating 49% year on year to Rs192 crore and consolidated net sales grew 23% to Rs798 crore. Consolidated operating profit, or earnings before interest, tax, depreciation and amortisation (Ebitda), for the quarter stood at Rs226.8 crore with Ebitda margins at 28.4%.

Ishan Sethi, Vaishnavi Kandalla and Pulkit Patni, analysts with Goldman Sachs, said raised Zee’s operating margin prediction by about 100 basis points to 25.8% due to this performance. They also upgraaded the target price for the stock to Rs135, in a note to clients on Tuesday.

For the last fiscal, operating revenues stood at Rs3,011.4 crore, while consolidated operating profit was Rs826.6 crore with an operating profit margin of 27.4%. Net profit was Rs623.6 crore.

Subhash Chandra, chairman, Zee, said the last fiscal was a significant year for the television media industry in several ways. “The number of television households witnessed a healthy growth. Similarly, advertising revenues bounced back after a slowdown in fiscal 2010, reflecting a buoyant recovery in the economy. The sector also saw some consolidation taking place. However, what was really encouraging is that digitisation continued to be the dominating theme,” he said.

The numbers for fiscal 2011 have been arrived at after consolidating the financials of Taj TV Ltd, a company statement said. Zee has also merged with itself the 9X business undertaking of 9X Media Pvt and ETC Networks with effect from March 31, 2010. “Post the merger of ETC Networks with Zee, the entire education business undertaking of Zee was demerged into a new listed company, Zee Learn Ltd, effective April 1, 2010. Hence, the numbers for this quarter are not strictly comparable on a like-to-like basis,” the statement said.

Punit Goenka, managing director and chief executive officer, Zee, said in a year which recorded a resurgence of advertising revenues on television, the company has outperformed the industry. “We ended fiscal 2011 on a good note, gaining viewership share across several genres, combined with improved revenue shares, better operating margin and increased cash flow. With our subscription revenues growing at a healthy pace, our overall revenues have recorded a 23% growth over the fourth quarter of last year. For fiscal 2011, our revenues grew 37%, while Ebitda grew 36%, despite increased losses in sports business,” said Goenka.

He said the (sports) losses were contained to Rs15.2 crore during the fourth quarter, in line with their earlier forecast. Goenka said that the company’s content focused approach combined with better monetisation of subscription revenues is expected to deliver steady returns in the year ahead.

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