ZEE Q1 results: 80-90% plunge in profit likely; shares in focus

Shares of ZEE Entertainment Enterprises Ltd (ZEE) may see a steep 80-90 per cent drop in profit for the June quarter amid higher losses in ZEE5 and higher other costs including salary expenses. Sales are seen rising 3-5 per cent YoY. Brokerages said while advertisement sentiment improved during the quarter, large benefits are unlikely. While ZEE's market share is likely to be stable, weaker ad revenue coupled with elevated investments should result in record-low margins, they said.

Kotak Institutional Equities sees adjusted profit for ZEE to fall 87.30 per cent YoY to Rs 15.50 crore against Rs 121.60 crore YoY. It sees net sales rising 3 per cent YoY to Rs 1,902 crore. It factors in a 4.5 per cent decline in ZEE's ad revenues despite the weak base (impact of Zee Anmol withdrawal from FTA is now in the base).

"Our Q1 estimate implies that ZEE's ad revenues are still 20 per cent-plus below Q1FY20 level. We bake in 3 per cent QoQ (15 per cent YoY aided by a low base) growth in domestic subscription revenue driven by price increases on implementation of NTO 3 and a 3 per cent yoy decline in international subscription revenue. We expect modest 2 per cent growth in other operating revenue considering that there were no major movie releases (Zee Studios) during the quarter," Kotak said.

Nuvama brokerage pegs profit at Rs 9.6 crore, down 91.7 per cent YoY. It sees sales rising 4 per cent YoY to Rs 1,920 crore. "We expect moderate growth in advertising for this quarter. Subscription revenues are likely to grow 2-3 per cent YoY. With margins coming back for FMCG sector, we expect gradual recovery in ad spends in the coming quarters. Other sales and services of the company will be moderate because of high base in Q1FY23 when it had a good line up of movies," Nuvama Institutional Equities said.

Emkay Global said muted advertising trends should result in the weak advertising growth persisting. “While an increase in their advertising spends has been highlighted by FMCG companies, it is unlikely to reflect in the advertising revenue yet. Subscription revenue is likely to show a small uptick, as the NTO3.0 implementation comes into effect. With investments remaining elevated, margins are likely to fall further, after record-low levels in Q4FY23," said Emkay Global.

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Motilal Oswal Securities pegged profit at Rs 16.20 crore, down 86 per cent YoY. This brokerage sees sales rising 5.4 per cent YoY to Rs 1,944.70 crore.

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