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Zee may churn out healthy Q3 numbers, but challenges stay

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NEW DELHI: Media conglomerate Zee Entertainment Enterprises is expected to deliver healthy numbers for the December quarter of 2018-19, say brokerages.

The company is set to report its Q3 earnings on Tuesday.

It had reported a rise in operations and advertising revenue for the second quarter, which may well continue for the third quarter as well, aided by festive season buying.

“Domestic advertising revenue growth may be healthy at 17 per cent. Market share gains in the flagship channels and continued strengthening of its base in the regional market will lead to strong performance,” brokerage HDFC Securities said.

The brokerage expects subscription revenue of Zee to grow by nearly 18 per cent on a year-on-year (YoY) basis.

While the brokerage thinks Zee is in a sheltered position for the near future owing to increasing viewership in regional markets and better advertisement and subscription revenues, the market will closely observe its outlook on digital business and revenue growth.

The company has to face increased competition in the OTT (over-the-top) space, which will be a challenge.

The OTT space is seeing huge content investments by big players like Amazon, Reliance Jio, and the like. Increased competition in the regional market and the digital space may pose a challenge for the company.

Edelweiss Securities anticipates revenue, Ebitda and PAT of Zee to jump nearly 14 per cent, 20 per cent and 21 per cent, respectively, on a YoY basis.

The brokerage is expecting a spurt in advertising and domestic subscription revenue.

“Growth in revenue is to be led by nearly 15 per cent YoY surge in advertising revenue (on a base of about 26 per cent; 22.7 per cent YoY in Q2FY19) and 14 per cent YoY domestic subscription revenue spurt (on a negative base of 16 per cent; 26 per cent YoY in Q2FY19),” Edelweiss Securities said.

The brokerage expects that the domestic subscription revenue may remain robust on account of Phase III monetisation and digitisation.

Kotak Institutional Equities, too, has an optimistic view on Zee’s earnings.

“We expect 20 per cent YoY growth in advertisement revenues and domestic subscription revenues to grow 20 per cent YoY, aided by catch-up revenues and phase-III monetisation,” the brokerage said.

The brokerage expects a 230 bps YoY rise in Ebitda margin, despite higher investments in content and operating costs.

Brokerages are expecting a double-digit advertisement revenue growth for broadcasters and multiplexes for the third quarter and are optimistic about the future prospects for the sector in the wake of the new tariff regime and GST rate cut.

However, intense competition in the OTT space and aggressive promotions and discounting after Jio’s entry are the key challenges for the industry.

Source: Economic Times