The Zee Entertainment Enterprises Ltd stock went up as much as 10% in the last two trading days to Rs544.75. The March quarter results announced on Wednesday are the reason for the cheer. The company delivered a strong operating profit margin in what was meant to be a tough quarter on account of demonetisation resulting in muted advertising spending.

Consolidated operating margin for the March quarter rose 367 basis points to 30.7%. Operating profit came in at Rs469 crore, better than the Rs430 crore and Rs442 crore, respectively, that analysts at Edelweiss Securities Ltd and Kotak Institutional Equities were expecting. A basis point is 0.01%.

Zee Entertainment’s operating costs, other expenses, and advertising and publicity expenses fell on a year-on-year basis, thus boosting operating performance. ICICI Securities Ltd says that operating costs were lower year-on-year due to consolidation of the sports business for two months and higher costs of the two cricket events telecast last year.

Overall revenue of Rs1,528 crore for the March quarter, though, was little changed from last year’s quarter. Within that, advertising revenue, accounting for 55% of total revenue, was flat; subscription revenue, accounting for 36.5% of total revenue, fell 6%; while the remaining revenue from other sales and services increased 54%.

Despite flat total advertising revenue, what stands out is the company’s 8% domestic advertising growth in the face of demonetization pressures. According to Ambit Capital Pvt. Ltd, this outperformance is a result of robust viewership in regional markets. “Aggressive investments by Star and Viacom18 lead us to question the sustenance of this trend," said Ambit in a report on Thursday.

Zee Entertainment maintains that advertising revenue of its international business was impacted by country-specific issues during the quarter and the base quarter revenue was aided by telecast of popular cricket events in Pakistan. Both domestic and international subscription revenue declined during the March quarter.

Despite the 10% appreciation in the last two days, the stock is still lower than its closing high (Rs553.45 on 10 April) for the current calendar year. Currently, one share trades at 34 times estimated earnings for this fiscal year. Valuations aren’t cheap. But, of course, if Zee Entertainment continues to outperform the industry in its advertising revenue, then valuations could well be sustained.

The company told analysts that it expects the lingering effect of demonetisation to recede gradually, thus easing pressure on advertisement growth. For this fiscal year, industry advertising revenue growth is estimated at low double-digits.

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