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Business News/ Markets / Stock Markets/  Zee Entertainment share price drops over 4% after Q3 results; brokerages cut target; Should you buy?
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Zee Entertainment share price drops over 4% after Q3 results; brokerages cut target; Should you buy?

Zee’s advertising revenue fell 3.3% to ₹1,027.4 crore from ₹1,063.4 crore, while subscription revenue increased 3% to ₹921.3 crore from ₹894.4 crore, YoY.

Zee’s management outlined a recovery plan, which targets steady state 8-10% revenue CAGR coupled with an EBITDA margin of 18-20% by FY26. (Image: REUTERS)Premium
Zee’s management outlined a recovery plan, which targets steady state 8-10% revenue CAGR coupled with an EBITDA margin of 18-20% by FY26. (Image: REUTERS)

Zee Entertainment share price declined over 4% in the early trade on Wednesday after the media and entertainment company reported its Q3 results. Zee shares as much as 4.37% to 180.35 apiece on the BSE.

Zee Entertainment Enterprises (ZEEL) posted a net profit of 58.5 crore in the quarter ended December 2023, up 140% from 24.32 crore during the same period a year ago.

Zee’s advertising revenue fell 3.3% to 1,027.4 crore from 1,063.4 crore, while subscription revenue increased 3% to 921.3 crore from 894.4 crore, YoY.

The company is charting a three-pronged approach – cutting costs, reducing overlaps between businesses, and enhancing quality to regain margins – after its merger with Sony Pictures Entertainment collapsed, Zee’s managing director and CEO Punit Goenka said in an earnings call.

Read here: Zee plans to cut costs, reduce overlaps after merger with Sony collapses

The management outlined a recovery plan, which targets steady state 8-10% revenue CAGR coupled with an EBITDA margin of 18-20% by FY26. However, analysts believe necessary interventions will have a one-time cost that would result in near-term margin pressure before recovery from H2FY25.

Here's what analysts have to say on Zee Q3 results and Zee share price:

Emkay Global Financial Services 

Failure of the merger can also have possible cases of shareholder activism, in our view. Also, multiple legal issues can result in potentially significant losses in case of an unfavorable verdict, even as such issues consume management bandwidth, Emkay Global Financial Services said.

It cuts FY24-26E EBITDA estimates by 5-16%, to factor-in the near-term margin weakness on account of interventions. It believes emergence of a new buyer or partner would be a key trigger for a stock re-rating.

The brokerage firm retained its ‘Negative’ view on the stock and maintained a ‘Sell’ rating, cutting the target price to 165 per share.

Also Read: Hindalco share price volatile: Should you Buy, Sell or Hold the stock?

Nuvama Institutional Equities

Zee Entertainment posted Q3FY24 revenue and EBITDA broadly in line with Nuvama Institutional Equities’ estimates. Given ad revenues facing the heat from a subdued macro environment, merger falling off and a likely potential loss of market share due to Viacom and Disney Hotstar deal, the brokerage cuts FY24E, FY25E and FY26E EPS estimates by 5% each.

It maintained a ‘Reduce’ call and cut the target price to 179 per share from 190 earlier.

Motilal Oswal Financial Services

Motilal Oswal Financial Services is of the view that the improvement in profitability observed within the Zee5 segment is encouraging, especially considering its historical impact on overall profitability. With the merger process now being called off, it would be important to see the company’s growth plans moving forward, particularly focusing on the recovery in the ad market, and decisions within the digital space. 

The brokerage has revised down its EBITDA and PAT estimates for FY25 by 8% and 11% on the back of laggard recovery within the ad revenues. 

It reiterated its ‘Neutral’ stance on the stock and maintained the target price of 200 per share.

Zee Entertainment share price has been under pressure since the collapse of Zee-Sony merger. Zee shares have fallen over 25% in the last one month.

At 9:20 am, Zee shares were trading 1.46% lower at 185.85 apiece on the BSE.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions. 

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Published: 14 Feb 2024, 09:23 AM IST
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