Business Desk – Zee Entertainment Shares: Shares of Zee Entertainment Enterprises Limited i.e. ZEEL came under pressure after the June quarter results. The stock fell 4.82% to Rs 89.90 intra-day. Later the fall eased and the stock was trading around Rs 92.45, down 2.12%.
The opinions of 15 analysts covering the company are divided. Of these, 7 have given Buy rating and 6 have given Sell rating. There is a big difference regarding target price also. CLSA has given a target of Rs 125, Citi Rs 80 and Motilal Oswal has given a target of Rs 100.
CLSA sees upside of Rs 125
CLSA has given outperform rating to ZEEL and a target price of Rs 125. According to the brokerage, the company's consolidated revenue in the June quarter increased by 5% year-on-year to Rs 1,900 crore, although it was less than expected.
The 11% decline in advertising revenue was a matter of concern. On the other hand, subscription revenue grew by 16% YoY and 11% YoY due to expansion of FIFA 2026, OTT and Zee5.
However, due to FIFA programming costs and Sports Channel launch, A&P i.e. Advertising and Promotion expenses increased, which put pressure on the company's margins.
Citi's opinion: Shares may fall to Rs 80
Giving Sell rating on ZEEL, Citi has kept a target price of Rs 80. According to the brokerage, 16% growth in subscription revenue and 58% growth in Zee5 revenue is positive.
But the 11% decline in advertising revenue is still a big concern. Citi believes that sustainable improvement in margins requires continued improvement in the advertising business.
Returning to the Sports Business through FIFA and Football Properties can increase Subscribers, Viewership and Advertiser Engagement. But it is not yet clear how much profit the company will get from these investments.
Consolidated EBITDA margin declined to 4.1% due to higher expenditure on content and marketing.
Motilal Oswal's Rs 100 Target
Motilal Oswal has given a target price of Rs 100 on ZEEL with a neutral rating. According to the brokerage, subscription revenue grew 16% in the June quarter, but advertising revenue declined 11.5%. At the same time, EBITDA declined by 65%.
However, Zee5 had a strong performance. Its revenue grew by 58% and Adjusted EBITDA remained positive for the third consecutive quarter. Despite this, the continuous decline in profit of Linear TV business limited the benefit of Zee5's growth.
Impact of FIFA spending will be visible in the second quarter
According to Motilal Oswal, the management is hopeful about improvement in advertising revenue, but is also cautious. The company may benefit from Festive Season, better Macro-Economic Conditions and return to Sports Business.
The company is also expanding into areas like Kids Entertainment and Micro-Drama. The full impact of the FIFA Subscription Pack and its associated content costs may be visible in the second quarter.
24% cut in FY27 earnings estimate
In view of the weakness of the advertising market and increasing expenditure on content, Motilal Oswal has cut ZEEL's FY27 Earnings Estimate by 24% and FY28 Estimate by 14%.
Rs 125 or Rs 80? What is the path ahead for the stock?
The future direction of ZEEL will mainly depend on Advertising Revenue, Growth of Zee5, Sports Investments and Margins. CLSA's Rs 125 target reflects strong growth expectations, while Citi's Rs 80 target reflects concerns over weak advertising business and rising expenses. Whereas Motilal Oswal's Rs 100 target shows the middle path.
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