Maintain 'buy' on Zee Entertainment – TP lowered to Rs.153 - Geojit BNP Paribas Financial Services

- Buy rating on Zee Entertainment has been retained with a lower target price of Rs.153, as against the earlier target of Rs.160.TP is lowered due to weak EBITDA margin for 4QFY12.

- Revenue for 4QFY12 was better than market estimates but the company faced margin pressure as it has made investments in content to regain viewership. Margin pressure was also due to higher sports losses.

- Viewing margin pressure, EPS estimates for FY13 has been cut 12% and 10% EPS estimate cut for FY14.

- The company is expected to gain from mandatory digitization ordinance. This would increase digital subscriber base three times in three years time.

- Better monetization of content would also be possible through MediaPro.

- After a weak FY12, advertisement revenue will also bounce back in FY13.

- Through investments in content, the company has improved viewership but this has come at the cost of margins.

- The company is debt free and the free cash flow generation is strong. The company is dividend paying and also buying back the shares.

- The stock is valued at P/E of 20 (past 10 year average) of FY14 EPS.

Source : Equity Bulls

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