Whalesbook
Motilal Oswal has kept its Neutral rating on Zee Entertainment Enterprises Ltd., with a target price of ₹80 per share. This target is based on a forward price-to-earnings multiple of approximately 12 times for FY28. The brokerage noted that Zee Entertainment is currently trading at a price-to-earnings ratio below 5 times its projected FY28 enterprise value to EBITDA. The company also holds substantial cash reserves of about ₹2,700 crore. These low valuations are the main reason for the firm's cautious stance.
Ad Revenue Challenges Continue
The firm pointed to ongoing issues with Zee's domestic advertising revenue, which has dropped significantly by around 37% between FY19 and FY26. This is due to slower ad spending by Fast-Moving Consumer Goods (FMCG) companies on traditional TV. Motilal Oswal believes a solid recovery in ad revenue is needed for Zee Entertainment's multiples to improve.
Lowered Earnings Forecasts
Motilal Oswal has cut its EBITDA estimates for FY27 and FY28 by 11-13%. Adjusted profit after tax forecasts have also been reduced by 5-6% for the same period. These changes reflect the persistent weakness in ad revenue and expected rises in operating costs. While the brokerage has factored in a 3.5% compound annual growth rate for ad revenue from FY26 to FY28, it sees potential downside risks from the structural shift of advertising spending towards digital platforms.
The firm's financial models project a 4% CAGR in overall revenue between FY26 and FY28. However, it expects that EBITDA and Profit After Tax (PAT) for FY28 will be down 24% and 17%, respectively, compared to FY25 levels.