"ZEE Entertainment reported its Q2FY13 numbers which beat our expectations by far driven by a robust ad growth due to the India-Sri Lanka series, new program launches and improvement in market share of its channels. However, the growth came at the expense of margins owing to investment into higher cost content and their marketing. The topline stood at Rs 953.5 crore against our estimate of Rs 829.5 crore, growing 32.7% YoY on the back of robust ad growth of 33.7% and subscription revenue growth of 35.7%. EBITDA margins compressed 607 bps YoY and 485 bps QoQ due to higher investment in new programmes. PAT also beat our expectations by large to stand at Rs 187.7 crore, growing 20.3% YoY mainly due to lower tax rate. Though the numbers of ZEEL have beaten our estimates, it has come at the cost of margins. Going forward as well, though we expect revenue to grow handsomely owing to impending digitisation and investment in content, margins would remain under pressure."
"The average weekly GRP's of Zee TV improved to 237 with a relative market share of 22% among the top 5 GEC's. While the ad revenue grew by 33.7% YoY, the subscription revenue grew by 35.7%. We expect the growth to continue on the back of investment in content and impending digitisation. We expect ad revenue to grow at 18.7% and 10.1% and the subscription revenue at 24.6% and 18.3% in FY13 and FY14 respectively."
"The margins contracted sharply in the quarter owing to investment in new channels, programmes and marketing of its properties. Due to its continued investment in content, the margins are expected to remain pressurised subsequently as well. We have factored in a margin of 24.6% in FY13 and 25.3% in FY14. We continue to rate the stock at 21x FY14E EPS to arrive at a target price of Rs 175. We maintain hold on the stock," says ICICIdirect.com research report.
Institutional holding more than 40% in Indian cos
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