23 July 2012
1QFY13 Results Update | Sector: Media
Zee Entertainment Enterprises
BSE SENSEX
S&P CNX
17,158
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
M.Cap. (INR b)
M.Cap. (USD b)
5,205
Z IN
958.8
152/110
9/25/28
143.8
2.6
CMP: INR150
TP: INR154
Neutral
Zee Entertainment's 1QFY13 PAT grew 18% YoY and 11% QoQ to INR1.58b, above our estimate of INR1.5b.
While EBITDA and PBT were 17-20% above our estimate, PAT was dragged down by higher effective tax rate
of 38%. However, full year tax rate is expected to remain at ~30%.
Key positives: 1) Ad growth bounce-back and 2) Superior margin performance led by cost cutting (selling and
other exp down ~0.4b QoQ like-to-like).
Revenue grew 21% YoY to INR8.4b. Ad revenue grew 18% YoY and 8% QoQ to INR4.47b largely led by improved
ratings performance.
Flagship Zee TV's average GRPs improved from 158 in 3QFY12 to 215 in 1QFY13. Zee has largely introduced
replacement programs and would be increasing programming hours in coming quarters.
On a reported basis, subscription revenue grew 19% YoY to INR3.6b driven by domestic as well as international
growth. However, proforma domestic subscription revenue was largely flat QoQ.
EBITDA grew 49% YoY to INR 2.3b (v/s est of INR1.94b). Margin expanded 5pp YoY to 27.7%.
Zee reported sports business operating loss of INR210m (our est ~INR200m loss). Core (non-sports) EBITDA
margin declined 60bp YoY but grew 470bp QoQ to 34.2% (est of 29.7%).
We upgrade earnings by 13% on higher ad growth and ex-sports margin estimates. We model in 17%/14% ad
growth in FY13/14, stable ex-sports margin at 34%/33%, and sports loss of INR1b/0.8b.
The stock trades at P/E of 20.2x FY13E and 17.6x FY14E. Maintain
Neutral
with a revised target price of INR154
(INR120 earlier) based on 18x FY14E EPS.
Shobhit Khare
(Shobhit.Khare@MotilalOswal.com); +91 22 3982 5428
Investors are advised to refer through disclosures made at the end of the Research Report.
1

Zee Entertainment Enterprises
Key result highlights
Ad revenue grew 18% YoY and 8% QoQ to INR4.47b (est of INR4.24b).
Subscription revenue grew 19% YoY to INR3.64b. Domestic subscription revenue
remained largely flat QoQ on a proforma basis.
Operating expenses increased 12% YoY but declined 14% QoQ to INR6.1b. Non-
sports opex declined 6% QoQ.
EBITDA grew 49% YoY and 46% QoQ to INR2.3b (est of INR1.94b); EBITDA margin
improved 9pp QoQ to 27.7%.
Sports business revenue grew 14% YoY to INR1b ; sports EBITDA loss of INR210m
was largely in line.
Ad revenue growth of 18% led by strong market share recovery; favorable
base
Ad revenue growth of 18% was above our expectation of a 12% YoY growth.
Zee's ad revenue has been steadily growing on a sequential basis over the past
four quarters.
Ratings for the flagship channel Zee TV have improved significantly over the past
few months.
Weekly average GRP in 1QFY13 was 215 v/s 196 in 4QFY12 and 158 in 3QFY12.
Zee TV average weekly GRP has improved significantly from lows of 3QFY12
Sequential improvement in ad revenue continues (INR b)
Source: Company, MOSL
23 July 2012
2

Zee Entertainment Enterprises
Subscription revenue up 19% YoY; domestic subscription largely flat QoQ
1QFY13 subscription revenue grew 19% YoY to INR3.64b.
Excluding the impact of change in Media-pro accounting in 4QFY12, domestic
subscription was largely flat QoQ.
International subscription revenue grew 16% YoY and 8% QoQ likely due to INR
depreciation.
Domestic subscription revenue largely flat QoQ on proforma basis (INR m)
Source: Company, MOSL
Core EBITDA margins improve QoQ; Sports loss in line
Core EBITDA margin (excluding sports business) improved 470bp QoQ to 34.2%
led by decline in operating costs.
Sports revenue stood at INR1b (up 14% YoY) while operating costs amounted to
INR1.2b (down 17% YoY) resulting in EBITDA loss of INR210m.
Trend in EBITDA and margins ex-sports (INR b)
Sports loss in line (INR m)
Source: Company, MOSL
23 July 2012
3

Zee Entertainment Enterprises
Strong ad growth performance despite weak macro; digitization progress
to determine subscription outlook; maintain Neutral
We upgrade FY13/14 earnings by 13% on higher ad growth and ex-sports margin
estimates.
We factor-in 17%/14% ad growth in FY13/14, stable ex-sports margin at 34%/33%,
and sports loss of INR1b/0.8b.
At CMP of INR150, the stock trades at P/E of 20.2x FY13E and 17.6x FY14E based on
our revised estimates.
Maintain
Neutral
with a revised target price of INR154 based on 18x FY14E EPS.
Estimate change summary
INR b
FY13E FY14E
Ad revenue
Old
17.5
19.6
New
18.5
21.1
Change (%)
5.5
7.7
Subcription revenue
Old
15.3
17.3
New
15.4
17.3
Change (%)
0.5
0.0
Total revenue
Old
34.2
38.2
New
35.2
39.7
Change (%)
3.0
3.9
EBITDA
Old
8.2
9.3
New
9.4
10.6
Change (%)
13.9
13.6
EBITDA margin (%)
Old
24.0
24.4
New
26.6
26.7
Change (bp)
253
228
PAT
Old
6.3
7.3
New
7.1
8.2
Change (%)
12.8
12.5
EPS (INR)
Old
6.6
7.6
New
7.4
8.5
Change (%)
12.8
12.5
Source: MOSL
1QFY13 results v/s estimates (INR m)
1Q
FY12
3,787
3,051
145
6,983
5,423
1,560
22.3
89
30
255
1,696
0
1,696
394
23.2
1,302
-35
1,337
1,337
2,075
976
3,051
3,423
747
1,253
5,423
873
1,439
-566
-65
6,110
3,984
2,126
34.8
4Q
FY12
4,150
4,022
519
8,691
7,091
1,600
18.4
81
-219
330
2,068
180
2,248
618
27.5
1,630
28
1,602
1,422
2,973
1,049
4,022
4,242
759
2,090
7,091
1,279
1,867
-588
-46
7,412
5,224
2,188
29.5
1Q
FY13
4,472
3,641
317
8,430
6,097
2,332
27.7
99
18
301
2,517
0
2,517
947
37.6
1,570
-12
1,582
1,582
2,505
1,137
3,642
3,757
888
1,453
6,097
992
1,202
-210
-21
7,438
4,895
2,542
34.2
YoY
(%)
18
19
118
21
12
49
532bp
11
-41
18
48
NA
48
140
1,438
21
-66
18
18
20.7
16.5
19.4
9.8
18.8
16.0
12.4
13.6
-16.5
-62.9
NA
21.7
22.9
19.6
-62bp
QoQ
(%)
7.8
-9.5
-39.0
-3.0
-14.0
45.8
926bp
22.0
-108.2
-8.7
21.7
NA
12.0
53.2
1,013
-3.7
-142.9
-1.2
11.3
-15.7
8.4
-9.4
-11.4
17.0
-30.5
-14.0
-22.4
-35.6
-64.3
NA
0.3
-6.3
16.2
467bp
Source:
1Q
FY13E
4,241
3,694
326
8,261
6,319
1,942
23.5
85
12
300
2,145
0
2,145
644
30.0
1,502
3
1,499
1,499
2,639
1,054
3,694
3742
797
1780
6319
1,048
1,250
-202
-19
v/s est
(%)
5.4
-1.4
-3.0
2.0
-3.5
20.1
416bp
16.2
50.0
0.4
17.3
NA
17.3
47.2
763bp
4.5
-500.0
5.6
5.6
-5.1
7.9
-1.4
0.4
11.4
-18.4
-3.5
-5.3
-3.8
3.8
-185bp
Advertising revenue
Subscription revenue
Other sales and services
Total revenue
Total operating expenses
EBITDA
EBITDA margin (%)
Depreciation
Finance Cost
Other income
Proforma PBT
Exceptional item
Reported PBT
Tax
Effective Tax Rate (%)
PAT
Associates/Minority Interest
Reported PAT after minorities
Adjusted PAT after minorities
Subscription revenue (INR m)
Domestic
International
Total subscription revenue
Operating costs (INR m)
Prog, Transmission & Direct Exp
Staff Cost
Selling and Other Exp
Total operating costs
Sports business (INR m)
Revenue
Operating cost
EBITDA
EBITDA margin (%)
Non-sports business (INR m)
Revenue
Operating cost
EBITDA
EBITDA margin (%)
7,214
3.1
5,069
-3.4
2,145
18.6
29.7 445bp
Company, MOSL
4
23 July 2012

Zee Entertainment Enterprises
Zee: 1QFY13 Concall highlights
Industry ad outlook remains sluggish due to weakness in sectors like telecom,
auto, banking etc. FMCG has been doing well.
Regional portfolio ad growth slightly better than company average but no
meaningful divergence.
18% YoY ad growth has been due to mix of volume as well as rate increases for
Zee. However industry as a whole has not seen rate increases.
Management continues to expect TV industry ad growth at 7-9% for FY13; Zee
expected to outperform given market share increases.
Zee invested INR3.28b for buying movie rights in FY12; FY13 budget pegged at
INR1-2.5b depending on the opportunities.
Zee to increase original programming hours on flagship channel from 25-26hrs
currently to 32-34hrs by March 2013. This will entail cost increases and might
impact ex-sports margins (34% in 1QFY13) during the ramp-up phase.
Carriage fee expected to remain even in the digitized environment but will
reduce from current levels.
Net cash at INR11.8b; company will look towards returning cash to shareholders
through dividend/buy-back over and above strategic level of INR8-8.5b.
23 July 2012
5

Zee Entertainment Enterprises
Zee Entertainment Enterprises: an investment profile
Company description
ZEEL is the leading player in television broadcasting and
syndication of content overseas with well established
brands such as Zee TV, Zee Cinema, Zee Music, Zee
Sports and Zee Studio. Post the recent merger with Zee
News, the company has added regional channels like
Zee Telugu, Zee Kannada, Zee Marathi and Zee Bangla in
its portfolio. Zee has the world's largest Hindi film library
of over 3,000 movie titles. Zee has well-established
reach of over 500m viewers across 167 countries.
TRAI's QoS regulations seek to cap advertising time
on a clock hour basis which can significantly impact
ad volumes
Recent developments
Zee commenced its fresh buy-back on April 23rd 2012
with total outlay of INR2.4b. As of June 2012, the
company had bought-back 4.8m shares in the on-
going buy-back at an aggregate consideration of
~INR0.6b.
Zee recently launched its Golf channel Ten Golf, High
Definition sports offering Ten HD, and "new media"
platform "Ditto TV".
Key investment arguments
Zee has well-established reach of over 650m viewers
across 168 countries.
With its offering of ~30 channels, Zee addresses ~65%
of the viewer ship market in India.
Zee's flagship channel Zee TV is one of the top-three
Hindi GECs in India.
Zee has a strong subscription income base and
would further benefit from mandatory digitization
Valuation and view
We upgrade FY13/14 earnings by 13% on higher ad
growth and ex-sports margin estimates.
We factor-in 17%/14% ad growth in FY13/14, stable
ex-sports margin at 34%/33%, and sports loss of
INR1b/0.8b.
At CMP of INR150, the stock trades at P/E of 20.2x
FY13E and 17.6x FY14E based on our revised
estimates.
Maintain
Neutral
with a revised target price of
INR154 based on 18x FY14E EPS.
Key investment risks
Sports business continues to generate operating loss
Ad environment remains weak for broadcasters
Comparative valuations
P/E (x)
EV/EBITDA (x)
EV/Sales (x)
P/BV (x)
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
FY13E
FY14E
ZEEL
20.2
17.6
13.9
11.9
3.7
3.2
3.7
3.3
Sun TV
14.7
12.6
6.8
5.7
5.4
4.6
3.8
3.4
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
7.4
8.5
Target
Price (INR)
154
Consensus
Forecast
6.9
8.0
Upside
(%)
2.4
Variation
(%)
8.0
5.8
Reco.
Neutral
FY13
FY14
Current
Price (INR)
150
Target price and recommendation
Stock performance (1 year)
Shareholding pattern (%)
Jun-12
Promoter
Domestic Inst
Foreign
Others
23 July 2012
43.9
13.1
35.6
7.4
Mar-12
43.7
12.5
37.3
6.5
Jun-11
42.8
14.3
35.5
7.5
6

Zee Entertainment Enterprises
Financials and valuations
23 July 2012
7

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Zee Entertainment Enterprises
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