ZEE shares down 56% from Dec 2023 high; should you buy the stock? Here's target price

Shares of ZEE Entertainment Enterprises Ltd (ZEE) have fallen 56 per cent from December 2023 high of Rs 299.50 apiece, hitting retail investors hard, thanks to the media company's merger breakoff with Sony earlier this year. 

While the ZEE management and board have embarked on a comprehensive plan to help regain its lost glory, a superior performance as seen over FY13-19 would be difficult to replicate, given the altered industry dynamics, Emkay Global said in its latest note.

This brokerage believes that the near-term performance is likely to worsen due to such interventions, before ZEE sees any improvement. "Ongoing legal cases only add to its woes and, we believe, could derail current plans. While valuations are favorable, overall re-rating is likely to happen only if a new partner/buyer surfaces," Emkay Global said.

There were a total of 6,11,394 individual investors, with nominal share capital up to Rs 2 lakhs, invested in ZEE as on March 31. They accounted for 22.97 per cent stake in the media house at the end of the fourth quarter. 

"We cut FY25-26E Ebitda by 10-12 per cent, building in slower recovery. We upgrade ZEE to Reduce after a sharp 24 per cent correction since our last report and limited downside from current levels, but maintain a negative stance. We trim our target price to Rs 150 per share(8x Mar-26E Broadcasting EBITDA)," it said.

On Tuesday, ZEE shares were trading at Rs 136.95, up 0.22 per cent. Emkay Global's target price suggests a 9.52 per cent potential upside over this price. The broking firm said ZEE's near-term performance is likely to further deteriorate from current levels as it implements measures to achieve its FY26 targets. 

Zee5, which has been driving down margins of the entire company, can possibly be impacted and see some slowdown in revenue as the focus now shifts more toward reducing the losses. Also, the company’s legal woes continue with regard to the merger-related case with Sony, its tussle for cricket rights with Disney Star, and Punit Goenka’s ongoing SEBI case. 

"Any unfavorable decisions against the company could cause further pain and derailment of current plans, in our view. We believe the company is up against a tough business environment currently, and particularly with it competing against the larger entity of Disney- Reliance combined," it said,

ZEE has withdrawn its merger implementation application filed before the NCLT, to pursue growth and strategic opportunities. Emkay said the emergence of a new partner would be a key trigger for a stock re-rating. 

"The stock is currently trading at its lowest valuation since the last 10 years (on 1YF EV/ EBITDA basis), which is a clear sign of the tight spot it is in. The stock price has sharply corrected since the merger breakoff, and could continue to languish given lack of triggers in the near term," Emkay said.