ZEE Entertainment (ZEE) is likely to report up to 90 per cent de-growth in profit for the March quarter on a 12-16 per cent fall in sales. ZEE’s margins and top line will be hit by the NTO 3.0 blackout effect and tapering of ad and subscription revenues. Ad revenues have remained quite weak largely with discretionary companies also cutting back, analysts cited. Also, higher opex with no meaningful revenue accretion from ILT20 will hurt margins.
JM Financial expects ZEE to report 12.6 per cent YoY decline in revenues to Rs 2,030 crore. Ad revenue from ILT20, a UAE based T20 championship, would not be substantial in the first year to make up for other headwinds, it said adding that subscription revenues will be impacted by 10 days of blackout (of channels) by MSOs during the quarter to push back on price increases. While the issue is now resolved, it could have a 3-4 per cent hit on subscription/ad revenues, it said. Besides, absence of one-time revenue recognition of Siti Cable revenues in Q3 could weigh in 4Q offset partially by growth in Zee5.
"Lower revenues along with incremental cost due to media rights and telecast of ILT20 could impact margins. We estimate 400 bps margin contraction QoQ," it said while expecting profit at Rs 18.10 crore, down 89.70 per cent YoY. Ebitda margin is seen at 12.1 per cent against 16 per cent in December and 20.9 per cent in the year-ago quarter.
Nuvama Institutional Equities said as ZEE hosted ILT20, it would lead to incremental sporting cost, dragging margins. It sees profit falling 62.5 per cent YoY to Rs 86.90 crore on a 13.7 per cent YoY drop in sales at Rs 2,003 crore.
ICICI Securities sees profit falling 44.9 per cent YoY to Rs 100.30 crore on a 12.6 per cent YoY fall in sales at Rs 2,031 crore. It noted Zee's ad revenue may fall 12 per cent YoY decline owing to loss of ad revenues as it pulled out its GEC channels from free dish. The channels were also not present on some cable networks amid New Tariff Order implementation for a couple of weeks in February, adding that weak ad spending also weighed on revenues.
"Reported subscription growth is expected to be modest at 1 per cent YoY decline. We expect margins at 10.5 per cent, down 550 bps QoQ, given the higher content costs and weak top line show," it said.
Additional opex hit with no meaningful revenue accretion from conducting ILT20 are likely to drag Ebitda margins to multi-year low of 7.9 per cent, said Prabhudas Lilladher. This brokerage sees profit falling 77.6 per cent YoY to Rs 58.6 crore. It sees sales dropping 16.3 per cent to Rs 1944.90 crore.
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