Zee News (ZNL) is a diversified regional player with a strong foothold in all its markets. Its national channels, viz. Zee News and Zee Business have gained significant traction in viewership while cash cows Zee Marathi and Zee Bangla are maintaining their strong No.1 position.
ZNL’s strategic foray in the South has also paid off well with Zee Telugu and Zee Kannada performing remarkably, and Zee Tamizh being well on track.
Thus, as ZNL monetises its competitive position across markets, it is well poised to clock 23.3% CAGR in ad revenues over FY2008-10E.
Moreover, a strong and diversified bouquet coupled with advent of digital distribution platforms places ZNL in sweet spot in terms of maximizing the emerging subscription opportunity.
Economic slowdown, high cost structure and dearth of liquidity has completely changed the ballgame for the Indian broadcasters.
Nonetheless, we believe ZNL offers an attractive play on the dual emerging themes of regionalisation and digitisation owing to its strong positioning in the lucrative regional and news broadcasting space, its proven execution track record and backing by the Zee Group.
We believe that steady viewership gains in new channels and monetisation of the same coupled with higher Subscription Revenues will drive Zee’s future Earnings growth.
We estimate ZNL to post robust CAGR of 27.1% in consolidated topline to Rs594 crore over FY2008-10E and earnings to register a CAGR of 26.6% on account of robust Subscription Revenues and stable Margins.
We initiate coverage on the stock, with a BUY recommendation and DCF-based target price of Rs37.