Zee entertainment limited                                                                                                 ...
one day series against Zimbabwe. Other non cricket sports to be showcased on Ten Sports and
Zee Sports includes the UEFA C...
quarter, the channel would be airing hit movies of last year like Fashion, Welcome to Sajjanpur,
Kismet Konnection etc.
Th...
M oneyw ise .Be wi se.



     Investment Research Team

     Rajesh Jain Head (Research)

        Fundamental
        Res...
Smc Zee 18july09
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Smc Zee 18july09

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Smc Zee 18july09

  1. 1. Zee entertainment limited July 17, 2009 Quarterly Performance (Consolidated) For the quarter ended June 2009, consolidated operating revenues dipped 12% at Rs 475.93 crore. OPM for the quarter dipped 200bps at 24.6%. The resultant operating profit dipped 19% at Rs 117.01 crore. Current Price: Rs. 180.8 For the quarter, other income increased 17% at Rs 32.51 crore which mainly includes treasury income. Interest cost for the quarter decreased 57% at Rs 9.11 crore on the back of provision of lower mark to market loss on derivatives positions of Rs 2.4 crore against Rs 11 crore in the corresponding quarter previous year, lower effective interest rate and repayment of debt. STOCK DATA Depreciation charge for the quarter increased 36% at Rs 7.50 crore. The resultant PBT decreased 8% at Rs 132.91 crore. BSE Code 505537 NSE Symbol ZEEL Provision for taxation for the quarter was flat at Rs 41.59 crore with the effective tax rate up 250bps at 31.3%. The resultant PAT dipped 1% at Rs 91.32 crore. Minority interest pertaining to Reuters ZEE.BO share of losses of Zee Turner and Taj TV for the quarter was at Rs 10.58 crore and the resultant Bloomberg Z IN net profit for the quarter stood at Rs 101.90 crore down 1%. Reported net profit after prior period tax write-back of Rs 57.38 crore in the corresponding quarter previous year was down 36% at Rs 101.90 crore VALUE PARAMETERS Financial Results In Cr. Price (Rs) 180.8 Particulars Qtr Ending Qtr Ending 52 W H/L(Rs) 239.00/88.10 Mkt. Cap.(Rs Cr) 7846.72 June 09 June 08 Var. (%) Latest Equity(Subscribed) 43.4 Sales 475.93 541.96 -12 Latest Reserve 2299.6 OPM (%) 24.60 26.60 Latest EPS -Unit Curr. 5.77 Lat. P/E 31.33 OP 117.01 144.18 -19 Latest Bookvalue -Unit Curr. 53.99 Other income 32.51 27.80 17 Latest P/BV 3.35 PBIDT 149.52 171.98 -13 Div. Yield (%) 1.11 Interest 9.11 21.41 -57 Face Value 1.00 PBDT 140.41 150.57 -7 Depreciation 7.50 5.53 36 PBT before EO 132.91 145.04 -8 SHARE HOLDING PATTERN (%) EO 0.00 0.00 Description as on % of Holding PBT after EO 132.91 145.04 -8 30/06/2009 Tax 41.59 41.71 0 Foreign 30 PAT 91.32 103.33 -12 Institutions 20.77 Govt Holding 0 Minority interest -10.58 0.60 LP Non Promoter Corporate Holding 4.7 Net Profit 101.90 102.73 -1 Total Promoters 41.5 Prior period tax 0.00 -57.38 Total Public & Others 3.04 Net Profit 101.90 160.11 -36 EPS (Rs) 2.35 3.69 Management Views Sports business Zee Sports and Ten Sports continued their strong presence in the sports genre. During the quarter, Ten Sports aired the Indian cricket team's tour of West Indies. Domestic soccer tournaments such as the I-League and Santosh Trophy were aired during the quarter and met with relative success. Ten Sports would be airing some of the key fixtures featuring the Indian cricket team this quarter, including a tri-series featuring New Zealand and Sri Lanka as also a 1
  2. 2. one day series against Zimbabwe. Other non cricket sports to be showcased on Ten Sports and Zee Sports includes the UEFA Champions League soccer and the national soccer league- Nehru Cup. The Sports business revenue during the first quarter of FY10 were Rs 87 crore up from Rs 76.7 crore in the sequential quarter. There was a loss at operating level of Rs 27.2 crore against profit of Rs 7.51 crore. Consolidated Segment Results In Cr. Particulars Qtr Ending Qtr Ending June 09 June 08 Var. (%) % of total Segment Revenue Content & Broadcasting 464.06 525.56 -12 98 Education 8.87 6.2 43 2 Film Prodn. & Distribution 3 10.2 -71 1 Total Revenue 475.93 541.96 -12 100 Less inter-segment revenue 0 0 Net Revenue 475.93 541.96 -12 Segment PBITA Content & Broadcasting 117.22 124.48 -6 105 Education -0.06 0.22 PL 0 Film Prodn. & Distribution -5.41 4.99 PL -5 Total PBITA 111.75 129.69 -14 100 Less Finance Cost 8.47 7.13 19 Less EO 0 0 Add Other Income 29.63 22.48 32 PBT 132.91 145.04 -8 Segment Assets Content & Broadcasting 3102.85 2714.49 14 90 Education 13.28 7.44 78 0 Film Prodn. & Distribution -18.73 48.52 -1 Others 354.22 284.76 24 10 Total Assets 3451.62 3055.21 13 100 Performance of other channels The flagship Hindi General Entertainment Channel Zee TV delivered 231 weekly GRPs up from 208 weekly GRPs on an average during this quarter and attained a channel share of 21% in its genre. The channel has averaged 236 GRPs for the month of June 2009. The relative channel share of Zee TV in the fourth quarter improved over the third quarter and has remained steady overall across the fiscal 2009. The channel dominated its genre in the Top 100 programme chart, with a weekly average of 29 down from 32 in the sequential quarter out of the top 100 programmes. It has 24 programmes in the Top 50 programme chart. This quarter the channel launched two new fiction shows: Pavitra Risshta and Aap Ki Antra. Both these shows have been well received by audiences and have grown steadily in ratings, consistently featuring in the top 50 weekly charts. The Hindi movies channel Zee Cinema averaged 161 GRPs and captured over 35% channel share on a like to like basis this quarter. Initiatives such as the children movie festival Dopahar Zee Cinema Par enhanced the channel's offering to its viewers. The channel also aired blockbusters such as Jannat, Race, Jodha Akbar etc. Despite a big ticket cricket tournament on a competing movie channel, the channel's ratings continued to grow this quarter. In the coming 2
  3. 3. quarter, the channel would be airing hit movies of last year like Fashion, Welcome to Sajjanpur, Kismet Konnection etc. The network operates three Hindi movies channels Zee Premier, Zee Action and Zee Classic specifically for the digital platforms. The popularity of these channels has been growing with the fast expanding base of digital TV households in India. Zee Café, the network's English entertainment offering, premiered the latest season of 'Til Death, Just Shoot Me, Sutasi, America's Next Top Model (Cycle 11) and Battlestar Galactica (Season 4.5) in the quarter. Victoria's Secret 2008 Fashion Show and Conan O'Brien's The Tonight Show were the other highlights of the quarter. The channel would soon be airing the latest seasons of Grey's Anatomy, America's Most Smartest Model as also the big-ticket event of the year, Emmy Awards Live. This strong offering of the channel helped it garner 19% channel share for the quarter in its genre. The English movies channel Zee Studio acquired rights to various blockbusters including movies from studios such as BVITV, WEG, Hanway and MGM. In addition, the channel also tied up the rights to several critically acclaimed titles from noted film directors like Takeshi Kitano, Peter Weir, Wim Wenders, Bernardo Bertolucci etc. as also a set of over 20 'Made-for-TV movies' that have never been aired before in India. Zee Entertainment Studio (ZES) – Film Production & Distribution Business Zee Entertainment Studio (ZES), the Film Production & Distribution Business of the company released two feature films in the quarter- one each in Bengali and Marathi. ZES, as a division of ZEEL, registered revenues of Rs 3 crore and incurred costs of Rs 8.41 crore in the current quarter. Revenues were impacted due to the two month long nationwide multiplex strike. Management Comments Mr Subhash Chandra, Chairman, stated, "The media and entertainment industry in India continues to witness a shift in structure, driven primarily by a growing consumer preference for digital television. More than two million consumers opted for digital DTH services during the quarter. The quick adoption of digital services across population strata is indicative of a quantum change that will transform the business of television broadcasting in India in the foreseeable future. This quarter posed a big challenge on the advertising revenue front. On one hand the macro advertising environment remained weak and on the other, two major sports events took away revenues from entertainment channels. Intense competition in the Hindi entertainment segment also had its impact. We do see early signs of recovery in advertising revenues though overall ad spends on television may not be as buoyant as they were in the last few years. Growth in digital television homes in the country augurs well for all pay broadcasters. Reflecting the strength of Zee channels, our revenues from the DTH segment have continued to grow, as anticipated. Over the next few years, our business model would undergo a shift in favour of a subscription led model, as is the case globally. Being the largest pay network of this country, Zee will be an integral part and beneficiary of this success story." Mr Punit Goenka, Whole Time Director, commented "Our strategy during the last few years has been to create a formidable entertainment enterprise, and invest in the business in a focused, disciplined way. During the quarter, performance on advertising revenue stream was adversely affected by the macro situation. We focused on the factors under our control: operating efficiencies, content improvements and balance sheet management. Our network viewership base grew this quarter. Efforts of the company to attain leadership position across all genres yielded positive results with Zee TV achieving the number one position after a gap of several years. The heartening aspect of Zee TV's growth has been consecutive success of six of our latest shows, leading to a steady and sustainable rise in viewership. Going forward, our endeavour is to continue to gain viewership by offering best in class content. We focused on improving operating efficiencies across businesses and across functions. We made significant reductions across cost heads, without sacrificing quality. Our choice to strengthen subscription based service has proved correct and timely, and DTH revenue streams have performed better. As a result, despite a 29% drop in advertising revenues as compared to the first quarter of last fiscal, our operating margins have dropped only by 200 basis points. We are hopeful that a steady growth in ratings will help ZEEL deliver better performance in the coming quarters. Our focus on the balance sheet led to reduction of debt during the quarter and consequently interest cost came down." 2
  4. 4. M oneyw ise .Be wi se. Investment Research Team Rajesh Jain Head (Research) Fundamental Research Saurabh Jain Team Leader saurabhjain@smcindiaonline.com Saurabh Rana Team Leader saurabh_rana@smcindiaonline.com Priyanka Ahluwalia Sr. Research Analyst priyankaahluwalia@smcindiaonline.com Jaisheel Garg Sr. Research Analyst jaisheelgarg@smcindiaonline.com Manish Choudhary Sr. Research Analyst manishchoudhary@smcindiaonlne.com Ankita Nanda Research Analyst ankitananda@smcindiaonline.com Surabhi Sharma Research Analyst surabhi@smcindiaonline.com Dinesh Joshi Research Analyst dineshjoshi@smcindiaonline.com Harsh Gupta Research Analyst harsh_gupta@smcindiaonline.com Kamla Devi Research Analyst kamladevi@smcindiaonline.com Technical Research (Commodity / Dr. Equity ) Head - Technical (Commodities) ravisingh@smcindiaonline.com R.P.Singh Rakesh Bansal Head - Technical (Equities) rakeshbansal@smcindiaonline.com Ajit Mishra Sr. Technical Analyst ajitmishra@smcindiaonline.com Parminder Chauhan Research Analyst parminderchauhan@smcindiaonline.com Suruchi Kapoor Research Analyst suruchikapoor@smcindiaonline.com Derivative Research Nitin Murarka Head - Derivative Research nitinmurarka@smcindiaonline.com Vineet Sood Sr. Research Analyst (Strategies) vineetsood@smcindiaonline.com Kunal Sharma Research Analyst kunal_sharma@smcindiaonline.com Dhirender Singh Bisht Research Analyst dhirenderbisht@smcindiaonline.com Commodity/Currency Research Team Vandana Bharti Sr. Research Analyst vandanabharti@smcindiaonline.com Tejas Seth Sr. Research Analyst sethtejas@smcindiaonline.com Amit Pandey Sr. Research Analyst (Strategies) amitpandey@smcindiaonline.com Sandeep Joon Research Analyst sandeeepjoon@smcindiaonline.com Rupa Mehta Research Analyst rupamehta@smcindiaonline.com Shitij Gandhi Research Analyst shitijgandhi@smcindiaonline.com Subhranil Dey Research Analyst subhranildey@smcindiaonline.com Priyanka Chauhan Research Analyst priyankachauhan@smcindiaonline.com Mutual Fund Anant Sharma Sr. Research Analyst anantsharma@smcindiaonline.com Bhaskar Mandal Research Analyst bhaskar.mandal@smcindiaonline.com Support Team Simmi Chibber Research Executive simmi@smcindiaonline.com Shivanand Upadhyay Content Editor (Hindi) shivanand@smcindiaonline.com Pramod Chhimwal Graphic Designer pramodchhimwal@smcindiaonline.com SMC Stock Ratings Stock Ratings Absolute Returns Stock Ratings Absolute Returns Buy : Appreciate more than15% Reduce : Depreciate upto 10% Hold : Appreciate upto 15% Sell : Depreciate more than 10% Corporate Office: Mumbai Office: Kolkata Office: 11/6B, Shanti Chamber, Dheeraj Sagar, 1st Floor, 18, Rabindra Sarani, Pusa Road, New Delhi - 110005 Opp. Goregaon sports club, link road "Poddar Court", Gate No. 4, Mone ywise.Be wi se . Tel: +91-11-30111000 Malad (West), Mumbai - 400064 4th Floor, Kolkata - 700001 www.smcindiaonline.com Tel: 91-22-67341600, Fax: 91-22-28805606 Tel: 91-33-39847000, Fax: 91-33-39847004 D iscl aim er: This r epor t i s f or the per s onal in for m ation of th e author iz ed r ec ipient and does n't cons t r ue to be any inv es tm ent , leg al or tax at ion adv ic e to y ou. It is o nly for pr iv ate c ir c ulat ion and us e. T he r epor t is bas ed upon i nfor m ation t hat w e c ons ider r eliabl e, but w e do not r epr es ent that it is ac c ur ate or co mplet e, and i t s hould not be r elied upon as s uc h. N o ac ti on is s oli ci ted on the bas is of the cont ent s of the r epor t . T he r epor t s hould not be re prod uced or re dis tr ibut ed to any ot her pers on( s ) in any for m w itho ut pr ior w r itt en per m is si on of t he SM C . The c onten ts of t his mat er ial ar e gener al an d are nei ther c om preh ensi ve nor in clu si ve. N eit her S M C nor a ny of it s af fi liat es, as soc iat es , r epr es entat iv es , di rec t or s or em ploy ees shal l be r es ponsi ble fo r any los s or damage t hat may ari se t o any p ers on due to any ac ti on t ak en on t he bas is of this r epor t. I t does not c ons t itut e pe rs onal r ec omm endat ions or tak e int o ac c ount th e par t ic ular in ves t ment obj ec tiv es , fi nanc ial si tuat ions or needs of a n indiv idual cl ient or a cor por at e/s or any ent it y/ s . A ll inv es t ment s inv olv e r is k an d pas t per f or manc e does n't guar antee fut ur e r esul ts . The v alue of , and inc ome fr om inv es tm ents m ay var y bec aus e of the c hanges in the m ac r o and mi cr o f act or s g iv en at a c er tain p eri od of t ime . The per s on s hould us e his /h er ow n j udgment w hile t ak ing inv es tm ent d eci si ons. Ple ase note t hat w e and our af fi liat es, off ic er s , dir ec t or s, and em ploy ees , i ncl uding per s ons inv olv ed i n the p repa rat ion or i ss uanc e if t his mat er ial; ( a) fr om ti me t o t ime, m ay have long or s hor t posi tions i n, and buy or sel l th e sec ur it ies ther eof , of c ompany ( ies ) ment ioned her e in or ( b) be engaged in an y ot her tr ans ac tion i nvo lv ing s uch s ec ur it ies a nd earn b rok er age or ot her c om pens ati on or ac t as a m ar k et m ake r in t he f inanc ial ins t r ument s o f th e com pany ( ies ) dis c uss ed her ein or may per f orm or s eek to per f or m i nves t ment bank ing s er v ic es for s uc h c ompany ( ies ) or ac t as adv is or or lender / bor ro w er t o s uc h c ompany ( ies ) or © m ay ha ve an y ot her pot entia l c onfli ct of inter es t w ith r es pec t t o any r ec om mend ation and r el ated inf or ma tion and op inions . A ll dis put es s hal l be su bjec t t o the ex c lus iv e jur is dic ti on of D elhi H igh c ourt .

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