ZEE shares crash further, down 30% as brokers cut target prices on Sony development

Shares of ZEE Entertainment Enterprises Ltd (ZEE) crashed and saw multiple lower circuits in Tuesday's trade as broking firms turned outright bearish on the stock following the Sony India deal termination and cut target prices by up to 50 per cent. Against a closing value of Rs 231.75 on Friday, ZEE shares fell 29.98 per cent to hit a low of Rs 162.25 on BSE. This was the fresh 52-week low level for the stock, which hit a 52-week high of Rs 299.50 last month on December 12. The fresh analyst targets on the stock stayed in the Rs 170-200 range.

The selling was seen amid high volumes. A total of 10,52,31,549 ZEE shares worth Rs 1,761 crore got changed hands by 12.20 pm. A steep fall in stock price along with high volume suggest bearish sentiment on the counter.

In a filing to BSE, ZEE said despite conducting numerous deliberations in good faith, the two parties failed to arrive at a consensus on the pending conditions precedent that required action on the part of both ZEE and Culver Max, BEPL under the terms of the MCA. As per ZEE, MD & CEO Punit Goenka was agreeable to step down in the interest of the merger.

Motilal Oswal downgraded the scrip to 'Neutral' and suggested a target of Rs 200. This brokerage believes that a recovery in ZEE earnings is unlikely in the near term as it remained unsure of what path Zee may take going ahead and there is limited clarity on the long-term outlook of the business. CLSA reduced its price target on ZEE to Rs 198 from Rs 300 earlier, as it it felt that the competition may intensify with the reported merger of Reliance and Disney Star.

"The merger with Sony was the key valuation driver to move up in the past two years. But given the termination, we downgrade ZEE to Sell with March 2025E target pared to Rs 170 from Rs 340. But if the Disney contract is honoured, target price may move to Rs 130. Possibility of any other strategic/financial partner buying majority stake in Zee could provide respite to valuation multiple," Elara said.

Emky Global said: "We believe this breakdown can also spur shareholder activism against the ZEE management. Further, we reckon that ZEE will now draw other suitors for potential deals. Currently, we downgrade the stock to SELL (from Buy) due to weak competitive positioning and escalated corporate governance issues. We pull our target down to Rs 175 at 8 times Dec-25E SA broadcasting Ebitda (from Rs 315)."

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