INSUBCONTINENT EXCLUSIVE:
Zee provides a unique investment opportunity for the investors as there are no other leading media players listed
Also the recent share price correction, triggered by promoter woes, and the resultant fall in valuations has made the company a favourite of
analysts.
Investors used to consider Zee Entertainment Enterprises as a low risk high reward opportunity because of its strong business
Zee always used to report better than industry advertising growth rates and increased subscriptions
In addition to its strong presence in the Hindi entertainment space, Zee also invests heavily in regional language space and this should
make Zee a pan-India player
Due to increasing market share, Zee was also able to report 16% annualised advertisement revenue growth during the past five years.
However,
the decision of the promoters to raise money using Zee shares for their other projects has shattered this belief and dragged this counter to
With the promoters selling their stake to repay personal debt, a big overhang over the counter has been removed now
This means the investor focus will now shift to its business fundamentals and balance sheet.
Analysts’ viewsSell 3
Hold 10
Buy 16
The
media industry is going through cut-throat competition now and Zee is responding to it with increased investments
There was pressure on its working capital and its working capital days in first half of 2019-20 was 204 compared to 152 during the first
Zee’s continued investment in new regional channels and its over the top (OTT) platform Zee5 is the main reason for this
Since these investments (for acquiring new movie rights etc.) are needed short term, this pressure on cash flow from operations will
continue for some more time
However, analysts are hopeful that these pressures will be over soon and Zee will be able to return to positive free cash flows during
2020-21.
Recent share price correction, triggered by the promoter woes, and the resultant fall in valuation is another reason attracting
Zee also provides unique investment opportunity because other leading players from the media space are unlisted
However, investors entering this counter now should also know the possible risk involved
The biggest risk in Zee now is the uncertainty about upcoming management structure, because Subhash Chandra has resigned from the post of
chairman, though he will continue to be a non-executive board member
However, the current CEO Punit Goenka is working efficiently and is well entrenched from 2008, he is also from the promoters’ family
It means that the investors should keep a close watch on management changes in Zee.
Zee Entertainment compared with ET Media and Sensex
Stock price and index values normalised to a base of 100
Source: ETIG and Bloomberg.Selection Methodology: We pick up the stock that has shown maximum increase in “consensus analyst rating”
during the last one month
Consensus rating is arrived at by averaging all analyst recommendations after attributing weights to each of them (ie 5 for strong buy, 4
for buy, 3 for hold, 2 for sell and 1 for strong sell) and any improvement in consensus analyst rating indicates that the analysts are
getting more bullish on the stock
To make sure that we pick only companies with decent analyst coverage, this search will be restricted to stocks with at least 10 analysts
You can see similar consensus analyst rating changes during the last one week in ETW 50 table.
