Zee Entertainment - Q4FY20 First Cut - ICICI Securities

(CMP - Rs. 152, MCap - Rs. 14566 crore

Zee Entertainment reported a disappointing set of results for Q4FY20. While operating revenues were better than estimates, higher operating & admin costs, goodwill write-off and losses on investments led to negative bottomline.

Q4FY20 Earnings Summary

- Overall revenues came in at Rs. 1951.1 crore, down 3.4% YoY, (our estimates: Rs. 1772.1 crore) impacted by advertisement revenues which declined by 14.7% YoY to Rs. 1038.9 crore. Domestic ad declined by 15.1% YoY at Rs. 982.9 crore, but was better than our expectations of 18.5% YoY decline. The weak ad revenues were owing to the impact of conversion of FTA channels into paid, overall macroeconomic slowdown and Covid-19 led lockdown in March. The overall subscription revenues grew sharply by 31.2% YoY to Rs. 741.4 crore, led by strong growth 40.7% YoY (our estimates: 25.4% YoY) in domestic subscription to Rs. 660.7 crore which was driven by tailwinds of NTO and Zee5 subscription growth

- The company reported higher operating costs mainly due to accelerated amortisation expenses of Rs. 259.8 crore, new channels launch and investment in Zee5. Additionally, provision of Rs. 343 crore for doubtful debts was made which led to operating losses. EBITDA came in at -Rs. 283.9 crore, well below our expectations of Rs. 425.3 crore

- The company reported exceptional loss of Rs. 113.7 crore towards goodwill write-off. Also, other income was affected by Rs. 383.5 crore MTM losses on overseas investments. Consequently, the company reported net loss of Rs. 766.7 crore against expected PAT of Rs. 231.7 crore

The performance of the quarter was weak on the ad revenue front and only silver lining was strong domestic and digital subscription growth. Higher operating & admin costs coupled with write-offs led to losses. In Q1FY21E, ad revenues were significantly down due to lockdown and other issues such as related party transactions are likely to weigh in on the company's performance. We will come out with an update soon.

Shares of ZEE ENTERTAINMENT ENTERPRISES LTD. was last trading in BSE at Rs.151.65 as compared to the previous close of Rs. 159. The total number of shares traded during the day was 2221911 in over 24521 trades.

The stock hit an intraday high of Rs. 158.9 and intraday low of 150.65. The net turnover during the day was Rs. 339956831.

Source : Equity Bulls

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