ZEEL Q2 results preview: Sales may rise 5-8%, double-digit margin likely after 2 quarters

Zee Entertainment Enterprises Ltd (ZEEL) is likely to report up to 60 per cent year-on-year (YoY) fall in profit for the September quarter on a single digit rise in sales. Revenue may remain flat as domestic ad-revenues fall, offset by improvement in domestic subscription revenues. Margin is seen improving sequentially but falling on an yearly basis.

Among brokerages, ICICI Securities sees ZEEL’s consolidated revenue to rise 8.6 per cent YoY to Rs 2,203 crore. It sees Ebitda falling 14.8 per cent YoY to Rs 250 crore as programming costs are unlikely to increase materially.

"We estimate ZEEL to register net profit of Rs 48.70 crore, down 57 per cent YoY. While ZEEL’s operating performance in Q2FY24E is likely to be below historical trends, we think the news flow around the proposed merger with Sony India will likely continue to be the key driver for the stock," the brokerage said in its results preview.

Prabhudas Lilladher expects domestic ad-revenues for ZEEL to decline 2.5 per cent YoY on continued weakness in the ad-environment. That said, the domestic brokerage sees subscription revenue rising 4.5 per cent YoY on account of benefits from NTO 3.0 and higher subscription income from ZEE5.

"In addition, we expect ZEEL to benefit from windfall of Gadar-2. We expect Ebitda margin to claw back to 11.1 per cent after being in single digit for last 2 quarters," it said. This brokerage sees adjusted profit falling 32.3 per cent YoY to Rs 108 crore on 5.6 per cent YoY rise in sales at Rs 2,142.20 crore.

Kotak Institutional Equities is factoring in a 3 per cent YoY decline in ZEEL's ad revenues despite the weak base. Its Q2 estimates imply that ZEEL's ad revenues would still 20 per cent below Q2FY20 levels.

"We estimate 10 per cent yoy growth in domestic subscription revenue (price increases on implementation of NTO 3 and Zee5) and a 1 per cent YoY decline in international subscription revenue. We build in a robust 65 per cent growth rate in other operating revenues, boosted by the collections of Gadar 2 (Rs2 bn+).

We estimate 4.3 per cent YoY growth in Ebitda to Rs 310 crore, led by about 630 bps QoQ expansion in Ebitda margin to 14.1 per cent (versus 14.7 per cent in 2QFY23)," Kotak said.

This brokerage though sees adjusted profit rising 7.7 per cent YoY to Rs 171.80 crore.

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