Maintain Neutral on Zee Entertainment - Q4 FY2011 update - Motilal Oswal

ZEE ENTERTAINMENT 4QFY11: Well above est; Sports playing out well finally; 10-16% earnings upgrade; Maintain Neutral

Zee Entertainment's 4QFY11 PAT increased 64% YoY and 83% QoQ to Rs2.08b, driven by lower sports business loss and flat revenue in the core business.

QoQ growth of 9-10% in advertising as well as subscription revenues was primarily driven by sports business. Sports business revenue grew 48% QoQ.

Core margins (non-sports segment) declined 200bp QoQ (up 600bp YoY) to 37% mainly on flat revenue performance.

The company expects ad revenue growth of 12-14% in FY12 (ex-sports) and sports business EBITDA loss at Rs0.8-1b in FY12 (vs Rs2.08b in FY11).

We are upgrading earnings by 10-16% to reflect lower sports losses (Rs1.2b in FY12/13 vs Rs1.5b earlier) and better cost management. The stock trades at a P/E of 20x FY12 and 17.4x FY13. Maintain Neutral with a revised price target of Rs140 (18x FY13 EPS).

Source : Equity Bulls

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