Result Update October 26, 2016
Rating matrix Rating : Buy Zee Entertainment (ZEEENT) | 514 Target : | 583 Target Period : 12 months Potential Upside : 14% Another good show...
• Revenues came in at | 1695.4 crore (vs. our estimate: | 1633.8 What’s changed? crore), growth of 22.4% YoY, led by robust subscription revenues, Target Unchanged EPS FY17E Changed from | 13.1 to | 12.3 which grew 21.7% YoY to | 583.3 crore (vs. estimate of | 546.4 EPS FY18E Unchanged crore) driven by strong traction in domestic subscription (up 24.6% Rating Changed from Hold to Buy YoY) during the quarter. Advertising revenues at | 959.2 crore, up 13.7% YoY (15.7% YoY on restated Q2FY16 advertisement revenues Quarterly performance as per IND AS), were in line with our estimate of | 957.4 crore. The Q2FY17 Q2FY16 YoY (%) Q1FY17 QoQ (%) revenue beat can also be partially attributed to other sales and Revenue 1,695.4 1,384.9 22.4 1,571.6 7.9 syndication revenues, which came in at | 152.9 crore (our estimates EBITDA 489.2 354.6 38.0 453.2 8.0 | 130 crore), owing to outperformance of the movie Rustom EBITDA (%) 28.9 25.6 325 bps 28.8 2 bps • EBITDA came in at | 489.2 crore vs. our expectation of | 441.1 crore PAT 238.4 247.4 (3.6) 217.0 9.9 benefiting from high operating leverage. Consequently, EBITDA Key financials margins came in at 28.9%, up 325 bps YoY, higher than our | Crore FY15 FY16E FY17E FY18E expectations of | 27% Net Sales 4,884 5,851 6,774 7,071 • PAT came in at | 238.4 crore (vs. expectation of | 315.4 crore). PAT EBITDA 1,254 1,510 1,943 2,335 came in lower owing to Ind-AS implementation wherein it has Net Profit 978 1,027 1,182 1,679 incorporated MTM impact of | 82.9 crore for change in fair value EPS (|) 10.2 10.7 12.3 17.5 Continues industry leading ad growth trajectory… Valuation summary Zee Entertainment posted ad growth (15.7% YoY) ahead of the industry FY15 FY16E FY17E FY18E average in Q2FY17 and continues to remain a favoured pick in the P/E 50.5 48.1 41.8 29.4 broadcasting space with its bouquet of ~36 domestic channels across Target P/E 57.3 54.6 47.4 33.4 genres. The company expects to continue its industry leading growth, EV / EBITDA 38.1 31.6 24.3 19.6 going ahead. The company also sounded a cautionary note on P/BV 8.9 7.9 6.8 5.7 moderation in FMCG and e-commerce spends, which may have some RoNW 17.6 16.8 16.2 19.2 impact on industry growth in coming quarters. However, the company RoCE 25.3 25.9 26.0 29.0 remained upbeat on telcos ad spends owing to 4G launches coupled with Stock data GST rollouts wherein potential savings in tax outgo by companies may be Particular Amount reinvested for ad spend. We expect Zee to post 10.7% CAGR in FY16-18E Market Capitalization (| crore) 49,355.0 to | 4195.7 crore in its advertisement revenues. The FY18E ad revenues Total Debt (FY16) (| crore) 0.9 exclude sports business. Therefore, the growth appears optically lower. Cash (FY16) (| crore) 973.2 Sports business sale to help Zee focus on core business EV (| crore) 47,790.6 52 week H/L (| ) 590/ 350 Zee, in Q2FY17, entered into a definitive agreement to sell its sports Equity capital (| crore) 96.0 business held under the wholly-owned subsidiaries viz. Taj TV and Taj Face value (|) 1.0 Television India Pvt Ltd to Sony Networks India Pvt Ltd for an all-cash consideration of ~$385 million (~| 2600 crore). The exit is expected to Price performance free up investments outlined for the sports business, which would boost 1M 3M 6M 12M the performance of the core business. In addition, the sports business TV Today 8.5 14.4 6.6 33.7 also entailed higher working capital requirement. Hence, the exit is also Sun TV 7.6 25.5 49.5 41.5 likely to improve the working capital cycle. The sale will lead to a 9.6% ZEEL -2.4 10.2 27.7 18.5 dilution in revenues but will be PAT accretive by 2.7% as the sports
segment was a negative EBITDA business. Research Analyst Continues to clock industry leading growth, recommend BUY Bhupendra Tiwary Zee continues to clock industry leading ad revenue aided by traction in [email protected] regional & new channels. In addition, the strength across genres and Sneha Agarwal investments in fresh content is likely to aid overall revenues. The sport [email protected] business exit is likely to boost margins and earnings and would enable
the company to focus on the core business. We continue to value the company at 32.0x P/E at an FY18E EPS of | 17.5 and separately value the
cash inflow of | 2300 crore (ex-tax with tax assumed at 10.0% of the deal value) at par arriving at a revised target price of | 583. We have a BUY recommendation on the stock.
ICICI Securities Ltd | Retail Equity Research
Variance analysis Q2FY17 Q2FY17E Q2FY16 Q1FY17 YoY (%) QoQ (%) Comments Revenue 1,695.4 1,633.8 1,384.9 1,571.6 22.4 7.9 Revenue beat was led by robust subscription revenues, which grew 21.7% YoY and higher other sales and syndication revenues, owing to outperf or mance of the movie R us tom and syndication r ev enues from several cricket series played during the quarter Other Income -39.7 70.0 58.9 -39.8 -167.4 -0.4 The number is negative due to Ind-AS implementation wherein it has incorporat ed MTM hit of | 82.9 crore for a change in fair value Raw Material Expenses 0.0 0.0 0.0 0.0 NA NA Employee Expenses 153.3 155.2 126.7 149.9 21.0 2.2 Admin & Other Expenses 168.8 223.2 179.1 191.3 -5.7 -11.7 The admin and other costs were lower led by reduction in carriage fee
Marketing Expenses 115.3 115.0 120.9 119.7 -4.6 -3.7 Operational Cost 768.8 699.2 603.6 657.5 27.4 16.9 The operating costs were higher due to telecast of several cricketing events and release of Rustom movie Ot her Expenses 0.0 0.0 0.0 0.0 NA NA EBITDA 489.2 441.1 354.6 453.2 38.0 8.0 EBITDA Margin (%) 28.9 27.0 25.6 28.8 325 bps 2 bps The EBITDA margins was higher owing to operating leverage Depreciation 33.6 25.3 19.8 25.1 69.8 33.8 The depreciation was higher due to upgrade in fixed assets Interest 8.6 7.8 2.1 7.5 311.1 14.0
Total Tax 163.4 162.5 112.3 162.6 45.6 0.5 PAT 238.4 315.4 247.4 217.0 -3.6 9.9 The PAT came in lower owing to Ind-AS implementation wherein it has incorporated MTM impact of | 82.9 crore for a change in fair value 82.9 Key Metrics Ad Revenue Growth 15.7% 17.8% 34.7% 19.0% -54.8 -17.4 The ad growth was led by superior performance of regional channels Domestic Subscription % 24.6% 15.1% 11.2% 13.6% 119.0 81.4 Superior domestic revenues were driven by early completion of content deals and catch up deals of earlier quarters International Subscription % 11.5% 4.0% 19.2% 16.7% -40.2 -31.5
Source: Company, ICICIdirect.com Research
Change in estimates FY17E FY18E (| Cr or e) Old New % C hange Old New % Cha nge Comments Revenue 6,742.0 6,774.3 0.5 7,124.0 7,071.3 -0.7 We have fine-tuned our earnings estimates by incorporating H1FY17 pe rfo rma nc e EBITDA 1,887.0 1,943.0 3.0 2,351.8 2,334.7 -0.7 EBITDA Margin (%) 28.0 28.7 69 bps 33.0 33.0 0 bps Incorporate higher margins for FY17E given in Q2FY17 beat PAT 1,255.1 1,181.8 -5.8 1,673.8 1,678.9 0.3 EPS (|) 13.1 12.3 -5.8 17.4 17.5 0.3 The earning downgrade is largely owing to MTM impact in H1FY17
Source: Company, ICICIdirect.com Research
Assumptions Current Earlier FY15 FY16 FY17E FY18E FY17E FY18E Ad Revenue Growth 11.3% 29.4% 14.9% 6.5% 16.1% 6.9% The growth rate for FY18E is lower as ad revenue from sports will be eliminated from FY18E onwards Domestic Subscription % 8.0% 13.2% 14.7% 1.0% 12.4% 2.9% The FY18E numbers excludes sports business contribution International Subscription % -17.3% 6.9% 10.9% 11.3% 10.1% 11.0%
Source: Company, ICICIdirect.com Research
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Company Analysis Zee continues its industry leading ad growth journey Zee reported ad revenue growth of 13.7% YoY (15.7% YoY on restated Q2FY16 advertisement revenues as per IND AS), in the quarter aided by strong growth in regional channels. This was higher than industry ad growth of 13-15% during the quarter. Zee has a leadership position in Marathi and Bengal and is in the top 3 positions in Telugu and Kannada space. During Q2FY17, Zee Tamil witnessed a marked improvement in viewership, and was the second ranked channel in August and September in the Tamil market.
The company expects to continue its industry leading growth, going ahead. The company, however, sounded cautionary on moderation in FMCG and e-commerce spends, which may have some impact on industry growth in the coming quarters. As per the company, FMCG which forms 55-60%of the TV ad spend, would thus impact ad growth by 1% for every 2% impact on spends. However, the company remained upbeat on telcos ad spends owing to 4G launches coupled with GST rollouts wherein potential savings in tax outgo by companies may be reinvested for ad spend. International ad growth is expected at low double to high single digits. Though the programming hours were on the lower side with 25 hours in the quarter, the management has guided at increasing ad inventory through increase in programming hours. We expect Zee to post 10.7% CAGR in FY16-18E to | 4195.7 crore in its advertisement revenues. The FY18E ad revenues exclude sports business. Therefore, the growth looks optically lower.
Exhibit 1: Ad growth trend
4,500.0 4,195.7 35 28.9 3,939.4 4,000.0 30 3,500.0 3,429.6 25 3,000.0 2,660.3 2,380.0 21.2 20
2,500.0 (%) 2,000.0 11.8 15
| crore 14.9 1,500.0 10 1,000.0 6.5 500.0 5 - - FY14 FY15E FY16E FY17E FY18E
Ad revenue Growth
Source: Company, ICICIdirect.com Research
Domestic revenues to witness mid teen growth in FY17E The company reported 11.0% CAGR in FY13-16 in its domestic subscription revenues, which were aided by digitisation, benefits from phases I and II. The industry is awaiting stringent orders from the government towards making complete Phase III digitisation a reality. Subscription revenues would get a fillip as and when phase III digitisation, which covers ~36 million subscriber base, is successful. The company maintained mid teens growth guidance in domestic subscription in FY17. We expect a domestic subscription revenue CAGR of 7.6% in FY16-18E to | 1868 crore on the back of the ARPU increase being undertaken by DTH players and the upcoming potential from the Phase III markets. Overall subscription is expected to grow 7.9% in FY16-18E to | 2395.6 crore. The growth is lower as FY18E numbers exclude sports business contribution.
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Exhibit 2: Subscription revenue trends
3,000.0 16.0 10.8 13.9 14.0 2,500.0 11.8 12.0 2,000.0 10.0
1,500.0 8.0 %
| crore 6.0 1,000.0 4.0 500.0 3.1 1.2 2.0 0.0 1,802.8 1,824.1 2,040.2 2,324.4 2,395.6 0.0 FY14 FY15E FY16E FY17E FY18E
Subscription Growth
Source: Company, ICICIdirect.com Research
EBITDA margins to inch upwards, going ahead… The margins saw significant expansion in the quarter owing to operating leverage. Going ahead, the company intends to invest in quality content and create a fresh pipeline to get audience engagement and boost its flagship channels ratings. Zee is expected to post an EBITDA margin of about 28.7% and 33% in FY17E and FY18E, respectively. The sharp expansion in FY18 margins is due to exclusion of sport business, which used to report EBITDA losses. Exhibit 3: EBITDA and PAT margins trend
35.0 33.0 30.0 28.7 27.2 25.7 25.8 25.0 23.7 20.0 20.2 20.0
% 17.5 17.4 15.0 10.0 5.0 - FY14 FY15 FY16 FY17E FY18E
EBITDA margin PAT margin
Source: Company, ICICIdirect.com Research
Regulatory changes to encourage ”pull factor” led marketing spends On the draft regulations for broadcasting services and interconnection arrangement, the company had some concerns as, according to the draft order, each consumer can have his own package, which is difficult to implement in the absence of infrastructure. However, the company believes it would increase transparency in content pricing and payment of carriage and allow consumers to choose channels. However, it acknowledges that the restriction on bouquet discount makes the “push” of the second GECs (& TV in case of Zee) difficult. It would therefore increase market spends to increase the “pull factor” and viewership rather than going for FTA route. As per the company, the resultant savings in carriage fee could be passed on through higher marketing spends.
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Conference call highlights
• Zee outlined that it has restructured its business into five verticals, each of which is expected to become a significant piece of the overall pie over the medium to long term Horizons. The five verticals are : ¾ Broadcasting: Currently the major portion of the business, this vertical is likely to remain the key part with focus on regional segment and improving the ratings of flagship & other GEC through new launches and improved selection of shows ¾ International business: This segment along with broadcasting (domestic) would form the lion’s share of the business in medium term. The company would continue to address the international market for Indian content in Hindi/Regional/dubbed language ¾ Movies & Music: Zee continues to focus on movies production both in Hindi and regional space. Zee Music Company, its music label, has built significant market share, with 60% incremental share in acquisition of music rights of new Hindi movies, during the quarter. ¾ Digital: Currently nascent, and the company has yet to discover the market opportunity. During Q2FY17, Ditto TV, its pay over-the-top (OTT) platform, reduced its subscription price to | 20/month vs. the platform clocking ~200 million video views in Q2 ¾ Live entertainment: Another nascent stage segment. The company expects huge opportunities from domestic as well as international events. During Q2FY17, Zee’s Live Events business rolled out its first event, ‘Wicked Weekends’ across the country • Fall in rating in Flagship channel: Zee acknowledged that a fall in ratings in its flagship Zee TV was owing to wrong implementation/selection of shows. A new business head has joined four to five months ago. The company has lined up a pipeline of new shows, which would be launched in H2FY17 and thus boost/revive ratings • Sports losses: Given the superior performance in HFY17, the sports losses guidance has been trimmed to less than | 100 crore. However, given the fact that the business would be transferred sometime before FY17 end, it could be lower • Domestic launches: The company launched three new channels in domestic market - Zee Anmol Cinema - a Hindi movie channel for FTA audience; Zee Yuva, a youth focused Marathi GEC to add on to its present offerings in Marathi market; and Zee Cinemalu, a movie channel in Telugu language. In October, it also refreshed the content of Zindagi, its other Hindi GEC. The company is also in the process of launching HD versions of its regional channels • International channel launches: Zee launched two new channels in the international market in Q2FY17 – Zee One – targeted at Spanish speaking Hispanic population in US and Zee Mundo - a Bollywood movie channel in Germany, which airs movies dubbed in German. Post the launch of the above mentioned channels, its international channels bouquet is at 40 with channels dedicated to native audience at 12 • & TV witnessed 12% QoQ improvement in viewership. The company indicated that while it is still away from the breakeven
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point – i.e., 9-10% viewership market share, it is on track to meet its target to achieve breakeven within the 3 years of launch. • Regional channels: In the Tamil market, Zee Tamil witnessed a marked improvement and was the second ranked channel in August and September. In the Telugu market, where it is third, it indicated that Gemini TV leads owing to huge movie content and Zee Telugu is superior in the fictional segment. In the Kannada market, where the company is number two, the leader (Colours Kannada) has higher content hours and high cost non fiction shows like Bigg Boss, which lends them the leadership • Free to air (FTA) channels advertisement market size is ~| 1500 crore (including Doordarshan). As per the company, ~80% of the market size is held by 8-10 channels.
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Key takeaways from annual report • Zee’s theme for FY16 Annual Report was ‘Consistency and Change’ wherein it outlined its strategic objectives and priorities. It listed its key strategic objectives as (a) to be a multimedia entertainment conglomerate, (b) attain global consumption leadership, and (c) consistently enhance shareholder value. • It listed four key priorities in the annual report encompassing its leadership position, expansion, digital foray and growth sustainability • The first key priority of Zee was to attain leadership position in key genres, wherein it spoke of its continued leadership across genres especially the leadership genres of regional markets such as Telugu, Marathi, Kannada, Odisha (Sarthak) and Bengali wherein the company is in the top two position. It also emphasised its leadership in Hindi movies cluster where it increased its viewership share to 34% • The next stated priority was to continue expansion in new markets and verticals — the company discussed on its expansion in movie production, theatres, live events and music over the past three years. In FY16, Zee created a new entertainment vertical - Zee Theatre to make unique theatre content across platforms. The company has also expanded in the international market and invested in new distribution deals across the Caribbean, African and APAC markets • The third priority was to identify consumer consumption patterns to offer relevant content— which focussed on its higher emphasis on digital platforms and content for digital audience. The company identified its focus on digital segment by creating multiple digital offering like OZee and Ditto TV and creating content which is customised for such platform. The fourth priority was to attain sustainable profitable growth through efficient capital allocation and prudent cost model. • Interestingly, sports did not feature in key priorities. The sale of sports business finally in Q2FY17, therefore, mirrored the management’s intention to shift/exit from the loss making sports properties. • Operating cash flow remained robust at | 730 crore despite acquisition of Sarthak Entertainment in FY16. FCF, however, was impacted by higher investments in building production studios and Sarthak Entertainment acquisition, while sale of air plane generated inflow of | 36.7 crore. Going ahead, with most of capex cycle over (in terms of any major channel launches), the FCF generation should improve going ahead
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Valuation Zee continues to clock industry leading ad revenue aided by traction in regional & new channels. In addition, strength across genres and investments in fresh content is likely to aid overall revenues. The sports business exit is likely to boost margins and earnings and would enable the company to focus on the core business. We continue to value the company at 32.0x P/E at an FY18E EPS of | 17.5 and separately value the cash inflow of | 2300 crore (ex-tax with tax assumed at 10.0% of the deal value) at par arriving at a revised target price of | 583. We have a BUY recommendation on the stock.
Exhibit 4: Valuations FY18E EPS 17.5 Multiple 32.0 Ex-deal value business valuation/share 559.4 Deal Inflow (| crore) 2,600.0 Tax Rate as a % of deal value (Assumed) 10% Ex-tax cash inflow (| crore) 2,300.0 Number of Shares Outstanding (crore) 96.0 Per share cash valued at par for the shareholders (|) 23.9 Target Price (|) 583
Source: Company, ICICIdirect.com Research
Exhibit 5: Valuations Sales Growth EPS Growth PE EV/EBI TDA RoNW RoCE (| cr) (%) (|) (%) (x) (x) (%) (%) FY15 4883.7 10.4 10.2 9.6 50.5 38.1 17.6 25.3 FY16 5851.5 19.8 10.7 5.0 48.1 31.6 16.8 25.9 FY17E 6774.3 15.8 12.3 15.1 41.8 24.3 16.2 26.0 FY18E 7071.3 4.4 17.5 42.1 29.4 19.6 19.2 29.0
Source: Company, ICICIdirect.com Research
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Recommendation history versus consensus
600 100.0 90.0 80.0 500 70.0 60.0
(|) 400 50.0 (%) 40.0 30.0 300 20.0 10.0 200 0.0 Oct-14 Dec-14 Mar-15 May-15 Aug-15 Oct-15 Dec-15 Mar-16 May-16 Aug-16 Oct-16
Price Idirect target Consensus Target Mean % Consensus with BUY
Source: Bloomberg, Company, ICICIdirect.com Research
Key events Date Event Jan-09 Asia Today Ltd, Mauritius, a wholly-owned overseas subsidiary of the company, acquired the balance 40% equity stake in Asia Business Broadcasting (Mauritius) Ltd, a company registered in Mauritius and divested their entire 100% holding in Pan Asia Infrastructure Ltd, Mauritius Jan-10 Company demerges the regional general entertainment channel business undertaking (comprising Zee Marathi, Zee Bangla, Zee Talkies, Zee Telugu, Zee Cinemaalu and Zee Kannada television channels) of Zee News (ZNL) Apr-10 The education business undertaking of the company was demerged from the company and transferred to Zee Learn Ltd on the appointed date Mar-11 Zee Entertainment Studios Ltd, BVI and ZES Mauritius Ltd, Mauritius amalgamated with their holding company ZES Holdings Ltd, Mauritius Jan-12 Company introduces new Bangla movie channel Dec-13 Court approves bonus issue of redemable preference shares in the ratio of 1:21 Jun-14 Launches new channel Zee Zindagi, which serves as a platform for global content Jan-15 Launches new channel & TV
Source: Company, ICICIdirect.com Research
Top 10 Shareholders Shareholding Pattern Rank Name Latest Filing Date % O/S Position (m)n Change (m) (in %) Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 1 Cyquator Media Services Pvt. Ltd. 30-Sep-16 25.1 241.4 0.0 Promoter 43.07 43.07 43.07 43.07 43.07 2 Essel Group 30-Sep-16 17.9 172.3 0.0 FII 48.39 47.63 47.13 48.12 48.02 3 The Vanguard Group, Inc. 30-Sep-16 1.6 15.6 -0.1 DII 3.52 4.15 4.07 3.78 3.54 4 Schroder Investment Management Ltd. (SIM) 30-Jun-16 1.6 15. 2 -0. 2 Others 5.02 5.15 5.73 5.03 5.37 5 BlackRock Institutional Trust Company, N.A. 30-Sep-16 1.6 15.2 0.2 6 GIC Private Limited 30-Sep-16 1.6 14.9 -0.5 7 Schroder Investment Management (Hong Kong) Ltd. 30-Jun-16 1.5 14.6 0.0 8 Capital World Investors 30-Jun-15 1.5 14.5 -32.9 9 Colum bia Wanger Asset Management, LLC 31-Dec-15 1.4 13. 5 0.0 10 Birla Sun Life Asset Management Company Ltd. 30-Sep-16 0.9 8.4 0.0
Source: Reuters, ICICIdirect.com Research
Recent Activity Investor name Investor name Buys Sells Grantham Mayo Van Otterloo & Co LLC +10.54M +1.60M Capital Research Global Investors -26.47M -4.53M Morgan Stanley Investment Management Inc. (US) +5.28M +0.65M Mackenzie Financial Corporation -9.02M -1.33M Northern Trust Investments, Inc. +5.00M +0.62M Emerging Global Advisors, LLC -4.54M -0.55M Schroder Investment Management (Singapore) Ltd. +4.18M +0.62M GIC Private Limited -4.15M -0.50M British Columbia Investment Management Corp. +3.39M +0.58M Baroda Pioneer Asset Management Company Limited -1.71M -0.26M
Source: Reuters, ICICIdirect.com Research
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Financial summary
Profit and loss statement | Crore Cash flow statement | Crore (Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E Total operating Income 4,883.7 5,851.5 6,774.3 7,071.3 Profit after Tax 977.5 1,026.8 1,181.8 1,678.9 Growth (%) 10.4 19.8 15.8 4.4 Add: Depreciation 67.3 84.0 115.2 99.0 Operational Cost 2,139.3 2,604.9 2,970.6 2,799.1 Add: Interest paid 10.3 12.3 31.7 32.0 Employee Expenses 449.8 523.2 618.3 586.9 (Inc)/dec in Current Assets -579.9 -310.1 -649.1 140.7 Admin & Other Expenses 1,040.8 746.5 744.9 784.9 Inc/(dec) in CL and Provisions 171.9 197.3 184.1 28.7 Marketing Expenses 467.3 497.5 565.7 Others 0.0 0.0 0.0 0.0 Total Operating Expenditure 3,630.0 4,341.9 4,831.3 4,736.6 CF from operating activities 647.1 1,010.3 863.7 1,979.2 EBITDA 1,253.7 1,509.6 1,943.0 2,334.7 (Inc)/dec in Investments -146.5 -68.3 -400.0 -850.0 Growth (%) 4.1 20.4 28.7 20.2 (Inc)/dec in Fixed Assets -93.5 -228.3 -250.0 -250.0 Depreciation 67.3 84.0 115.2 99.0 Others -58.8 -119.1 1.8 -0.4 Interest 10.3 12.3 31.7 32.0 CF from investing activities -298.9 -415.7 -648.2 -1,100.4 Other Income 227.8 201.6 80.5 312.0 Issue/(Buy back) of Equity 0.0 0.0 0.0 0.0 Exceptional Items - 33.1 - - Issue of Preference Shares 2.2 -2.2 0.0 0.0
PBT 1,403.9 1,581.8 1,876.7 2,515.7 Inc/(Dec) in loan funds (0.5) (0.3) - - Minority Interest (5.7) 1.8 (0.6) (1.7) Interest paid 10.3 12.3 31.7 32.0 PAT from Associates (3.7) (0.4) (6.7) - Others -188.1 -367.6 -168.6 -319.0 Total Tax 428.4 552.8 688.8 838.5 CF from financing activities -176.1 -357.8 -136.9 -287.0 PAT 977.5 1,026.8 1,181.8 1,678.9 Net Cash flow 172.1 236.8 78.5 591.9 Growth (%) 9.6 5.0 15.1 42.1 Opening Cash 564.4 736.5 973.2 1,051.7 EPS (|) 10.2 10.7 12.3 17.5 Closing Cash 736.5 973.2 1,051.7 1,643.6
Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research
Balance sheet | Crore Key ratios (Year-end March) FY15 FY16E FY17E FY18E (Year-end March) FY15 FY16E FY17E FY18E Liabilities Per share data (|) Equity Capital 96.0 96.0 96.0 96.0 EPS 10.2 10.7 12.3 17.5 Preference Share Capital 2,019.2 2,017.0 2,017.0 2,017.0 Cash EPS 10.9 11.6 13.5 18.5 Reserve and Surplus 3,434.6 4,118.4 5,194.9 6,618.8 BV 57.8 64.9 76.1 90.9
Total Shareholders funds 5,549.8 6,231.4 7,307.9 8,731.8 DPS 2.7 2.3 2.4 2.7 Total Debt 1.2 0.9 0.9 0.9 Cash Per Share 3.0 3.8 5.0 6.0 Others 29.2 38.8 38.2 37.8 Operating Ratios (%) Total Liabilities 5,580.2 6,271.2 7,347.1 8,770.5 EBITDA Margin 25.7 25.8 28.7 33.0 EBIT Margin 24.3 24.4 27.0 31.6 Assets PAT Margin 20.0 17.9 17.4 23.7 Gross Block 641.4 836.7 1,086.7 1,336.7 Inventory days 88.8 82.1 85.0 78.0 Less: Acc Depreciation 292.5 366.1 481.3 580.3 Debtor days 79.9 82.6 90.0 85.0 Net Block 348.9 470.6 605.4 756.4 Creditor days 31.4 32.4 34.0 34.5 Capital WIP 87.8 110.4 110.4 110.4 Return Ratios (%) Total Fixed Assets 436.7 581.0 715.8 866.8 RoE 17.6 16.8 16.2 19.2 Investments 1,764.2 1,958.8 2,358.8 3,208.8 RoCE 25.3 25.9 26.0 29.0 Inventory 1,187.8 1,316.0 1,577.6 1,511.1 RoIC 33.1 34.7 39.4 47.8 Debtors 1,069.2 1,324.5 1,670.4 1,646.7 Valuation Ratios (x) Loans and Advances 1,587.7 1,472.2 1,524.2 1,485.0 P/E 50.5 48.1 41.8 29.4 Other Current Assets 170.6 212.7 202.3 190.9 EV / EBITDA 38.1 31.6 24.3 19.6 Cash 736.5 973.2 1,051.7 1,643.6 EV / Net Sales 9.8 8.1 7.0 6.5 Total Current Assets 4,751.8 5,298.6 6,026.2 6,477.3 Market Cap / Sales 10.1 8.4 7.3 7.0 Creditors 420.4 519.4 631.0 668.4 Price to Book Value 8.9 7.9 6.8 5.7 Provisions 507.2 467.9 616.5 601.5 Solvency Ratios Other current liabilities 498.0 635.5 559.4 565.7 Debt/EBITDA 0.0 0.0 0.0 0.0 Total Current Liabilities 1,425.6 1,622.9 1,807.0 1,835.6 Debt / Equi ty 0.0 0.0 0.0 0.0 Net Current Assets 3,326.2 3,675.7 4,219.2 4,641.7 Current Ratio 4.3 4.4 4.0 3.8 Other non current assets 53.1 55.6 53.1 53.1 Quick Ratio 3.0 3.0 2.7 2.6
Application of Funds 5,580.2 6,271.1 7,347.0 8,770.5 Source: Company, ICICIdirect.com Research Source: Company, ICICIdirect.com Research . The historical numbers have been shown according to the previous reporting standards and have not been reclassified on the basis of the quarterly restated numbers given by the company. We will restate the numbers once the same is available for all the four quarters of FY16.
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ICICIdirect.com coverage universe (Media)
CMP M Cap EPS (|) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company (|) TP(|) Rating (| Cr) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E DB Corp (DBCORP) 386 455 Buy 7,101 16.1 21.3 25.2 23.9 18.1 15.3 13.3 9.9 8.3 29.9 31.8 32.5 22.0 23.7 23.9 DISH TV (DISHTV) 100 87 Hold 10,606 6.5 2.3 3.6 15.3 43.9 27.6 11.1 9.9 7.9 31.1 36.2 43.7 181.9 39.0 38.2 ENIL (ENTNET) 808 800 Buy 3,851 21.0 17.4 23.4 38.5 46.3 34.6 24.7 23.7 17.4 14.5 14.2 17.3 13.0 9.8 11.7 Eros (EROINT) 202 225 Hold 1,894 22.9 22.1 28.0 8.8 9.2 7.2 5.9 7.2 5.4 14.0 12.0 14.9 12.1 11.0 12.2 HT Media (HTMED) 91 86 Hold 2,127 7.2 6.4 7.5 12.7 14.3 12.2 7.9 5.6 4.6 10.7 11.7 12.5 8.2 6.8 7.4 Inox Leisure (INOX) 270 290 Buy 2,478 8.4 8.0 9.8 32.0 33.8 27.4 14.0 12.9 10.7 11.1 11.5 13.3 10.9 8.9 9.8 Jagran Prakashan 199 220 Buy 6,504 13.6 12.5 14.7 14.6 15.9 13.5 11.3 9.3 7.5 23.9 26.678 28.307 22.5 22.1 21.8 PVR (PVRLIM) 1,224 1,300 Buy 5,719 25.4 22.7 32.4 48.1 53.9 37.8 18.0 16.6 12.9 15.6 14.3 17.6 14.3 11.1 13.6 Sun TV (SUNTV) 532 480 Hold 20,979 23.2 27.3 31.9 23.0 19.5 16.7 11.1 9.7 8.4 36.1 39.8 42.9 24.9 27.7 29.8 TV Today (TVTNET) 336 363 Buy 2,001 15.8 18.8 24.1 21.2 17.9 13.9 12.6 9.9 7.7 27.6 27.3 29.5 17.7 18.0 19.5
ZEE Ent. (ZEEENT) 514 583 Buy 49,360 10.7 12.3 17.5 48.1 41.8 29.4 31.6 24.3 19.6 25.9 26.0 29.0 16.8 16.2 19.2 Source: Company, ICICIdirect.com Research
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RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;
Pankaj Pandey Head – Research [email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai – 400 093 [email protected]
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ANALYST CERTIFICATION We /I, Bhupendra Tiwary, MBA, Sneha Agarwal, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities is full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is India’s largest private sector bank and has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (“associates”), the details in respect of which are available on www.icicibank.com.
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