India Equity Research| Media - Edelweiss · PDF fileSector Relative to Market. ... FMCG ad growth ... India Equity Research| Media July 26, 2016 . Financials (INR mn) Year to March

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Edelweiss Securities Limited

Zee Entertainment Enterprises’ (ZEE) Q1FY17 revenue and EBITDA growth at 18.5% and 44.1% YoY, respectively, exceeded our expectations led by robust ad growth and lower programming costs. Key positives: (i) sharp 19.2% YoY rise in ad growth led by auto and telecom segments (refer our note, MD investing in multiple new drivers dated June 20, 2016); (ii) strong 16.7% YoY growth in international subscriptions aided by new offerings in Africa; and (iii) EBITDA margin expanded by 512bps YoY due to 370bps YoY dip in programming cost. Market share gains in regional markets and Phase III digitisation augur well. Maintain ‘BUY’. Firing on all fronts Ad revenue surged 19.2% YoY on good ad growth in auto and telecom sectors. However, FMCG ad growth (HUL reported flattish ad growth in Q1FY17) was below average and internet ad growth softened in Q1FY17. Domestic subscription revenue grew ~13.6% YoY, while international revenue shot up ~16.7%. Other sales jumped ~33% YoY aided by successful run by Sairat. Generally, India series in any quarter results in sports losses. In Q1FY17, though the India-Zimbabwe series were held, ZEE clocked sports EBITDA profit of INR171mn. EBIDTA margins stood higher aided by lower transmission and programming costs (370bps YoY dip). IND-AS impacted PAT (though notional) as fair value of preference shares was routed through P/L. Q1FY17 conference call: Key takeaways ZEE plans to expand in Germany, Spain and other geographies, and expects to clock double-digit growth in international subscriptions in FY17. Even though sports profit stood at INR171mn, the company guided for INR1bn sport losses in FY17. Original programming hours for Zee TV stood at 24 hours. Investment in programming will continue and will be more rational. FY17 operating capex will be ~INR700-1,000mn. Gross debt stood at INR18.28bn due to reclassification of preferential shares into debt. Outlook and valuations: Growth DNA; maintain ‘BUY’ Better ad growth, monetisation of ZEE Anmol, improvement in regional markets and Phase III digitisation are key positives. TV tariff rates will be a key monitorable. At CMP, the stock trades at 38.0x FY17E and 31.3x FY18E EPS. We maintain ’BUY/SO’ with TP of INR546 (36x FY18E EPS).

RESULT UPDATE

ZEE ENTERTAINMENT

Resilient amidst tough environ

EDELWEISS 4D RATINGS

Absolute Rating BUY Rating Relative to Sector Outperform Risk Rating Relative to Sector Medium Sector Relative to Market Overweight

MARKET DATA (R: ZEE.BO, B: Z IN)

CMP : INR 475 Target Price : INR 546 52-week range (INR) : 478 / 347 Share in issue (mn) : 960.4 M cap (INR bn/USD mn) : 456 / 6,775 Avg. Daily Vol.BSE/NSE(‘000) : 2,130.7

SHARE HOLDING PATTERN (%)

Current Q3FY16 Q2FY16

Promoters *

43.1 43.1 43.1

MF's, FI's & BK’s 3.8 4.2 4.2

FII's 48.1 47.1 47.6

Others 5.0 5.6 5.1 * Promoters pledged shares (% of share in issue)

: 16.67

PRICE PERFORMANCE (%)

Stock Nifty EW Media

Index

1 month 5.8 6.2 6.9 3 months 14.8 7.9 12.3

12 months 21.4 0.8 15.0

Abneesh Roy +91 22 6620 3141 [email protected] Rajiv Berlia +91 22 6623 3377 [email protected]

India Equity Research| Media

July 26, 2016

Financials (INR mn)Year to March Q1FY17 Q1FY16 % change Q4FY16 % change FY16 FY17E FY18E

Revenues 15,716 13,267 18.5 15,316 2.6 58,515 69,764 80,158 EBITDA 4,532 3,146 44.1 4,136 9.6 15,096 18,976 22,444 Adjusted Profit 3,302 2,385 38.5 2,659 24.2 10,483 13,188 15,773 Adj. diluted EPS 3.4 2.5 38.4 2.8 24.2 9.4 12.5 15.2 Diluted P/E (x) 50.5 38.0 31.3 EV/EBITDA (x) 30.4 23.9 19.9 ROAE (%) 27.1 28.4 28.3

Q1FY17 and Q1FY16 numbers are as per IND AS

https://www.edelresearch.com/showreportpdf-33080/ZEE_ENTERTAINMENT_ENTERPRISES_-_VISIT_NOTE-JUN-16-EDEL

Media

2 Edelweiss Securities Limited

Table 1: Trends at a glance

* Q1FY17 and Q1FY16 are as per IND AS

Source: Edelweiss research Table 2: Approximate PAT reconciliation

Source: Edelweiss research

Q1FY17 Conference Call | Key Takeaways Ad growth

Industry ad growth grew by 13-14% YoY. Zee will continue to make efforts to beat industry ad growth.

FMCG ad growth was below average, while internet ad growth softened slightly.

Automobile and telecom ad growth was good.

Revenue break up (INR mn) Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16* Q2FY16 Q3FY16 Q4FY16 Q1FY17*Ad revenue 6,221 6,259 7,426 6,697 7,653 8,433 9,419 8,645 9,120 International ad revenue NA NA NA NA NA 735 812 1,120 705 Domestic ad revenue NA NA NA NA NA 7,698 8,607 7,525 8,415 Domestic subscription 3,238 3,373 3,455 4,175 3,680 3,752 4,188 4,682 4,179 International subscription revenue 1,189 872 1,007 933 945 1,039 1,030 1,262 1,103 Total subscription 4,427 4,245 4,462 5,108 4,625 4,791 5,218 5,944 5,282 Sport businessSales 976 1,181 2,476 1,680 1,519 1,278 1,914 1,601 1,700 Costs 964 1,431 2,746 1,438 1,504 1,256 2,064 1,837 1,529 EBITDA 12 (250) (270) 242 15 22 (150) (236) 171 EBITDA margin (%) 1.2 (21.2) (10.9) 14.4 1.0 1.7 (7.8) (14.7) 10.1Non-sports businessSales (non-sports) 9,575 9,997 11,161 11,791 11,748 12,571 14,037 13,715 14,016Costs (non-sports) 6,495 6,543 7,358 9,325 8,617 9,047 9,585 9,344 9,656EBITDA (non-sports) 3,080 3,455 3,803 2,466 3,131 3,524 4,452 4,372 4,361EBITDA margin (non-sports) (%) 32.2 34.6 34.1 20.9 26.6 28.0 31.7 31.9 31.1 Growth rateAd revenues 17.4 7.3 8.5 15.0 23.0 34.7 26.8 29.1 19.2 Domestic subscription 2.2 0.7 4.0 24.9 13.7 11.2 21.2 12.1 13.6 International subscription revenue 10.8 (29.2) (19.0) (27.7) (20.5) 19.2 2.3 35.3 16.7 Total subscription revenues 4.4 (7.3) (2.3) 10.2 4.5 12.9 16.9 16.4 14.2 % of revenueTransmission & programming 38.2 42.1 47.3 46.0 45.5 43.6 44.0 44.9 41.8 Employee cost 10.6 9.7 8.0 9.0 9.9 9.1 8.1 8.5 9.5 EBITDA 29.3 28.7 25.9 20.1 23.7 25.6 27.0 27.0 28.8 PAT 19.9 20.3 22.5 16.9 16.2 19.4 17.2 17.4 18.6

INR mn Q1FY16 Q1FY17 YoY growth CommentReported PAT after IND AS 1,782 2,170 21.8 Add: Fair value impact due to preference shares

603 1,132 This is a notional amount which depends on the mark to market value of preferential shares.

Add: Tax on preference shares 62 62 As per IND AS norms, tax outflow on preferential share is part of financial expense.

Approx PAT before IND AS 2,446 3,364 37.5

Zee Entertainment Enterprises


Subscription revenue

There was no Phase III subscription revenue during the quarter.

The company is still doing fixed deals in Phase III markets. Hence, Phase III benefits will flow later.

International

ZEE will expand operations to Germany, Spain and other geographies.

The company’s new offerings in Africa are driving up the pace of international subscription revenue.

It expects to clock double-digit growth in international subscriptions in FY17.

Currently, ZEE produces local content only in Arabic.

International ad growth will grow at healthy space as the company expands into newer geographies.

Studio

ZEE wants to figure among the top-5 production houses by 2020.

The company plans to produce movie content in Telugu, Kannada and Punjabi languages very soon.

It is controlling risks in its production business by taking tge following steps: i) ZEE is producing a mix of films (small to high budget); ii) ~97% cost is written-off in the first week of release and hence no risks are carried on the balance sheet; iii) the company will be adopting the co-production model; and iv) it pre-sales some of its film rights to control risks.

Sports

The segment did much better gaining from the extra T20 games between India and Zimbabwe.

ZEE is still guiding for INR1bn losses in FY17. Programming cost

The number of hours has dipped only in the flagship channel, Zee TV.

Zee TV has 24 original programming hours. The company wants to only telecast quality content, which will come up in Q2FY17 and Q3FY17.

Investments in programming will continue, but it will be more rational.

Content cost depends on programming choices between fictional and non-fictional content.

IND AS impact

As per IND AS, certain kind of investments has to be mark to market.

Due to this change, the impact of INR1,130mn was routed through P&L due to change in the price of preferential shares.

Media


Other key takeaways

Gross debt: Stood at INR18.28bn due to reclassification of preferential shares into debt. Excluding the impact of preferential shares, gross debt was INR8mn.

Cash and equivalents: INR17.82bn

Capex: Operating capex will be ~INR700-1,000mn, while capex of another INR100-200mn will incurred for building a studio facility.

Music: ZEE enjoys >50% market share in terms of volume.

Tax rate: Tax pegged at 32.9% of adjusted PBT (excluding IND AS impact).

Outlook and valuations: Growth DNA; maintain ‘BUY’ Improving ad outlook due to stable government, best play on digitisation, product innovations and net cash are key positives in favour of ZEE. We believe, irrespective of higher subscriber additions by DTH or cable operators, broadcasters like ZEE will be one of the safest and most attractive plays on the digitisation theme. Amongst listed players, the company is the best placed to benefit due to its huge brand and bouquet of 33 domestic and 36 international channels. Also, it is underpinned by sturdy free cash flow, a secular growth story and stable dividend policy. Key concerns are (1) loss of ad share to internet and (2) flattish viewership of new channels like &TV and Zindagi. Also, we remain guarded about loss of share to internet ads and likely doubling of investments in movie business in FY17. TV tariff rate will be a key monitorable. We have factored in the possible loss of &TV in our numbers; we believe it could clock loss of INR7-10bn over the next 3-5 years (akin to other mainstream Hindi GECs) and break even only thereon. We assign target multiple of 36x to arrive at a target price of INR546. We maintain ‘BUY/Sector Outperformer’.

Chart 1: ZEE’s 1-year forward PE band

Source: Bloomberg, Edelweiss research

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Chart 2: Ad growth

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Chart 4: Sports business

Source: Company, Edelweiss research

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Media


Chart 5: Operational performance (ex-sports)


Table 3: Sports business


Table 4: EBITDA margin (non-sports)


Table 5: Sports business – Annual performance


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EBITDA (ex sports) EBITDA Margin (ex sports)

(INR mn) Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17Sales 1,959 976 1,181 2,476 1,680 1,519 1,278 1,914 1,601 1,700Costs 1,608 964 1,431 2,746 1,438 1,504 1,256 2,064 1,837 1,529 EBITDA 351 12 (250) (270) 242 15 22 (150) (236) 171 EBITDA margin (%) 17.9 1.2 (21.2) (10.9) 14.4 1.0 1.7 (7.8) (14.7) 10.1

(INR mn) Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17Sales (non-sports) 9,629 9,575 9,997 11,161 11,791 11,748 12,571 14,037 13,715 14,016Costs (non-sports) 6,864 6,495 6,543 7,358 9,325 8,617 9,047 9,585 9,344 9,656EBITDA (non-sports) 2,765 3,080 3,455 3,803 2,466 3,131 3,524 4,452 4,372 4,361EBITDA margin (non-sports) (%) 28.7 32.2 34.6 34.1 20.9 26.6 28.0 31.7 31.9 31.1

(INR mn) FY12 FY13 FY14 FY15 FY16 FY17E FY18ERevenues 3,934 4,960 6,591 6,313 6,312 6,800 6,700Costs 5,414 5,830 7,567 6,579 6,661 7,700 7,300EBITDA (1,480) (870) (976) (266) (349) (900) (600) EBITDA Margin (%) (37.6) (17.5) (14.8) (4.2) (5.5) (13.2) (9.0)



Table 6: ZEE’s sports schedule


Table 7: Pakistan Cricket Board sports schedule


Media


Financial snapshot (INR mn) Year to March Q1FY17* Q1FY16* % change Q4FY16 % change FY16 FY17E FY18E Advertisement 9,120 7,653 19.2 8,645 5.5 34,297 40,813 48,160 Subscription 5,282 4,625 14.2 5,944 (11.1) 20,579 23,451 27,998 Others 1,315 988 33.0 727 80.9 3,639 5,500 4,000 Net revenues 15,716 13,267 18.5 15,316 2.6 58,515 69,764 80,158 Total revenues 15,716 13,267 18.5 15,316 2.6 58,515 69,764 80,158 Transmission and prog 6,575 6,041 8.8 6,881 (4.4) 26,049 30,696 35,269 Staff costs 1,499 1,314 14.1 1,297 15.6 5,232 6,139 6,894 SG&A 3,110 2,766 12.4 3,002 3.6 12,139 13,953 15,551 Total expenditure 11,185 10,121 10.5 11,181 0.0 43,420 50,788 57,714 EBITDA 4,532 3,146 44.1 4,136 9.6 15,096 18,976 22,444 Depreciation 251 167 50.4 273 (8.1) 840 920 1,016 EBIT 4,280 2,979 43.7 3,862 10.8 14,255 18,056 21,428 Other income 734 687 6.9 458 60.5 2,016 2,308 2,846 Interest 75 77 (2.6) 42 76.9 123 347 342 Add: Prior period items Add: Exceptional items (1,132) (603) NA (331) (1,132) Profit before tax 3,807 2,985 27.5 4,278 (11.0) 15,818 18,884 23,931 Provision for taxes 1,626 1,189 36.7 1,618 0.5 5,528 6,805 8,137 Minority interest 1 (1) (200.0) - 18 18 18 Associate profit share (11) (15) NA (4) (4) (4) Reported net profit 2,170 1,782 21.8 2,659 (18.4) 10,268 12,056 15,773 Adjusted Profit 3,302 2,385 38.5 2,659 24.2 10,483 13,188 15,773 Diluted shares (mn) 960 960 960 960 960 960 Adjusted Diluted EPS 3.4 2.5 38.4 2.8 24.2 9.4 12.5 15.2 Diluted P/E (x) - - - 50.5 38.0 31.3 EV/EBITDA (x) - - - 30.4 23.9 19.9 ROAE (%) - - - 27.1 28.4 28.3 Tax Rate 42.7 39.8 37.8 35.0 36.0 34.0 As % of net revenues Transmission and Prog 41.8 45.5 44.9 44.5 44.0 44.0 Employee cost 9.5 9.9 8.5 8.9 8.8 8.6 SG&A 19.8 20.8 19.6 20.7 20.0 19.4 EBITDA 28.8 23.7 27.0 25.8 27.2 28.0 Reported net profit 21.0 18.0 17.4 17.9 18.9 19.7

* Q1FY17 and Q1FY16 numbers are as per IND AS



Company Description ZEE Entertainment Enterprises (ZEE) is one of the largest media companies in India. It owns and operates Zee TV and Zee Cinema, both leading channels in the Hindi GEC and movies segments, respectively. Besides these two, the company has an attractive bouquet of several other channels including Ten Sports, Ten Cricket, Ten Action, &pictures, &TV, Anmol, Zindagi, Zing, Zee Classic, Zee Action, Zee Café and Zee Studios. With the likes of Zee Marathi, Zee Bangla, Zee Telugu, and Zee Kannada, the company has an impressive bouquet of regional channels. Investment Theme GDP recovery, improvement in its market share in regional and movies genres and new launches will aid ad revenue growth. Higher penetration of DTH and the digitisation process augur well for faster growth in subscription revenue over the long term. We believe ZEE is well poised to benefit from this favourable environment. Key Risks Delay in monetisation benefit from digitisation.

Rise in new investments may pressurise margins longer than expected.

Slowdown in ad spends due to lower than expected GDP growth.

Increased sports losses.


Media

Financial Statements

Income statement (INR mn)

Year to March FY15 FY16 FY17E FY18E Net revenue 48,837 58,515 69,764 80,158 Direct costs 21,393 26,049 30,696 35,269 Employee costs 4,498 5,232 6,139 6,894 Total SG&A expenses 10,408 12,139 13,953 15,551 EBITDA 12,537 15,096 18,976 22,444 Depreciation 673 840 920 1,016 EBIT 11,864 14,255 18,056 21,428 Add: Other income 2,278 2,016 2,308 2,846 Less: Interest Expense 103 123 347 342 Add: Exceptional items - (331) (1,132) - Profit Before Tax 14,039 15,818 18,884 23,931 Less: Provision for Tax 4,284 5,528 6,805 8,137 Less: Minority Interest (57) 18 18 18 Associate profit share (37) (4) (4) (4) Reported Profit 9,775 10,268 12,056 15,773 Exceptional Items - (215) (1,132) - Adjusted Profit 9,775 10,483 13,188 15,773 Shares o /s (mn) 960 960 960 960 Diluted shares o/s (mn) 960 960 960 960 Adjusted Diluted EPS 8.7 9.4 12.5 15.2 Dividend per share (DPS) 2.3 2.3 2.9 3.5 Dividend Payout Ratio(%) 26.6 25.3 27.6 25.3

Common size metrics

Year to March FY15 FY16 FY17E FY18E S G & A expenses 21.3 20.7 20.0 19.4 Direct Cost 43.8 44.5 44.0 44.0 EBITDA margins 25.7 25.8 27.2 28.0 Net Profit margins 19.9 17.9 18.9 19.7

Growth ratios (%)

Year to March FY15 FY16 FY17E FY18E Revenues 10.4 19.8 19.2 14.9 EBITDA 4.1 20.4 25.7 18.3 Adjusted Profit 9.6 7.2 25.8 19.6 EPS (6.7) 8.4 32.7 21.6

Key Assumptions

Year to March FY15 FY16 FY17E FY18E Macro GDP(Y-o-Y %) 7.2 7.4 7.9 8.3 Inflation (Avg) 5.9 4.8 5.0 5.2 Repo rate (exit rate) 7.5 6.8 6.0 6.0 USD/INR (Avg) 61.1 65.0 67.5 67.0 Sector TV industry ad gr (%) 10.0 15.0 15.0 15.0 TV industry sub. gr (%) 10.0 14.0 20.0 20.0 Company Sales assumptions Ad revenue growth (%) 11.8 28.9 19.0 18.0 Domestic sub rev gr (%) 8.0 14.5 15.0 23.0 Internat sub rev gr (%) (17.3) 6.9 10.0 5.0 Sports revenues (INR mn) 6,313 6,312 6,800 6,700 Othr oper inc (% of rev) 8.8 6.2 7.9 5.0 Cost assumptions Trans costs (% of rev) 43.8 44.5 44.0 44.0 Personnel cost(% of rev) 9.2 8.9 8.8 8.6 Sell & Adm exp(% of rev) 21.3 20.7 20.0 19.4 Ad & pub exp(% of rev) 6.1 5.5 4.6 4.0 Promotion exp (% of rev) 4.5 4.1 3.4 3.0 Sports losses (INR mn) (266) (349) (900) (600) Financial assumptions Tax rate (%) 30.5 35.0 36.0 34.0 Capex (INR mn) 636 3,442 1,131 1,200 Debtor days 78 75 75 75 Inventory days 201 175 175 175 Payable days 58 58 58 58 Cash conversion cycle 222 192 192 192 Int rate on debt (%) 5.6 5.6 5.6 5.6 Dep. (% gross block) 10.3 9.4 9.4 9.4



Peer comparison valuation

Market cap Diluted P/E (X) EV / EBITDA (X) ROAE (%) Name (USD mn) FY17E FY18E FY17E FY18E FY17E FY18E Zee Entertainment Enterprises 6,775 38.0 31.3 23.9 19.9 28.4 28.3 DB Corp 1,107 18.1 15.9 10.1 8.6 26.9 27.0 DEN Networks 231 (34.4) (66.1) 6.7 5.7 (1.4) (0.1) Dish TV India 1,564 50.7 38.3 9.6 8.0 NM NM Hathway Cable & Datacom 396 NM NM 9.2 9.4 (10.3) (16.3) Jagran Prakashan 869 15.7 13.9 8.6 7.3 22.3 22.6 Sun TV Network 2,522 15.3 13.0 7.5 6.5 28.9 30.5

Source: Edelweiss research

Cash flow metrics

Year to March FY15 FY16 FY17E FY18E Operating cash flow 6,809 7,254 11,671 13,196 Investing cash flow (3,661) 144 (1,740) (1,201) Financing cash flow (3,427) (4,046) (4,785) (9,471) Net cash Flow (279) 3,352 5,147 2,524 Capex (636) (3,442) (1,131) (1,200) Dividend paid (2,601) (2,594) (3,332) (3,985)

Profitability and efficiency ratios

Year to March FY15 FY16 FY17E FY18E ROAE (%) 31.1 27.1 28.4 28.3 ROACE (%) 27.4 27.5 30.5 32.7 Inventory Days 201 175 175 175 Debtors Days 78 75 75 75 Payable Days 58 58 58 58 Cash Conversion Cycle 222 192 192 192 Current Ratio 4.1 3.9 4.3 4.6 Gross Debt/EBITDA 1.6 1.3 1.1 0.7 Gross Debt/Equity 0.6 0.5 0.4 0.3 Adjusted Debt/Equity 1.1 0.9 0.8 0.6 Net Debt/Equity 115.6 115.9 52.0 62.6

Operating ratios

Year to March FY15 FY16 FY17E FY18E Total Asset Turnover 0.9 1.0 1.0 1.1 Fixed Asset Turnover 4.4 4.6 5.0 5.6 Equity Turnover 1.6 1.5 1.5 1.4

Valuation parameters

Year to March FY15 FY16 FY17E FY18E Adj. Diluted EPS (INR) 8.7 9.4 12.5 15.2 Y-o-Y growth (%) (6.7) 8.4 32.7 21.6 Adjusted Cash EPS (INR) 10.9 11.8 14.7 17.5 Diluted P/E (x) 54.7 50.5 38.0 31.3 P/B (x) 12.9 10.8 9.0 7.5 EV / Sales (x) 9.4 7.8 6.5 5.6 EV / EBITDA (x) 36.7 30.4 23.9 19.9 Dividend Yield (%) 0.5 0.5 0.6 0.7

Balance sheet (INR mn)

As on 31st March FY15 FY16 FY17E FY18E Share capital 960 960 960 960 Reserves & Surplus 34,346 41,185 49,571 59,888 Shareholders' funds 35,306 42,145 50,531 60,848 Minority Interest 4 85 103 121 Short term borrowings 10 10 10 10 Long term borrowings 20,204 20,179 20,179 16,145 Total Borrowings 20,214 20,189 20,189 16,155 Long Term Liabilities 768 854 854 854 Def. Tax Liability (net) (531) (556) (556) (556)

Sources of funds 55,761 62,717 71,121 77,422 Gross Block 5,853 7,752 8,952 9,952 Net Block 3,213 4,486 4,844 4,908 Capital work in progress 878 1,104 1,000 1,000 Intangible Assets 8,163 9,370 9,327 9,447 Total Fixed Assets 12,254 14,960 15,171 15,355 Non current investments 1,464 3,048 3,048 3,048 Cash and Equivalents 15,656 17,124 22,880 25,404 Inventories 11,878 13,160 14,752 16,950 Sundry Debtors 10,692 13,245 14,269 16,395 Loans & Advances 15,877 14,722 14,722 14,722 Other Current Assets 1,706 2,126 2,126 2,126 Current Assets (ex cash) 40,153 43,253 45,870 50,194 Trade payable 4,204 5,194 5,373 6,104 Other Current Liab 9,562 10,474 10,474 10,474 Total Current Liab 13,766 15,668 15,847 16,578 Net Curr Assets-ex cash 26,387 27,585 30,023 33,615

Uses of funds 55,761 62,717 71,121 77,422 BVPS (INR) 36.8 43.9 52.6 63.4

Free cash flow (INR mn)

Year to March FY15 FY16 FY17E FY18E Reported Profit 9,775 10,268 12,056 15,773 Add: Depreciation 673 840 920 1,016 Interest (Net of Tax) 71 80 229 226 Others (1,474) (1,302) 903 (226) Less: Changes in WC 2,236 2,632 2,438 3,593 Operating cash flow 6,809 7,254 11,671 13,196 Less: Capex 636 3,442 1,131 1,200 Free Cash Flow 6,173 3,812 10,540 11,996


Media

Holding - Top10Perc. Holding Perc. Holding

Oppenheimer Funds Inc 9.62 Vanguard Group Inc 3.16 Schroder Investment Mgmt Group 1.94 Gic Private Limited 1.60 Blackrock Fund Advisors 1.50 Goldman Sachs Asia Llc 1.20 Columbia Wanger Asset Management 1.09 Birla Sun Life Asset Management 0.94 Bamco Inc 0.76 Icici Prudential Life Insurance 0.68

*as per last available data

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded No Data Available

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price No Data Available

*in last one year

Additional Data

Directors Data Subhash Chandra Non-Executive Chairman Ashok Kurien Non-Executive Director Lord Gulam K. Noon Independent Director Punit Goenka Managing Director & CEO Prof. Sunil Sharma Independent Director Prof. (Mrs.) Neharika Vohra Independent Director Subodh Kumar Executive Vice Chairman Manish Chokhani Independent Director

Auditors - M/S MGB & Co

*as per last annual report


Company Absolute

reco Relative

reco Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk DB Corp BUY SO M DEN Networks HOLD SP H

Dish TV India BUY SP M Hathway Cable & Datacom BUY SP M

Jagran Prakashan BUY SP M PVR BUY SO M

Sun TV Network BUY SP H Zee Entertainment Enterprises BUY SO M

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe within the sector

RELATIVE RISK RATING Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


Media

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91-22) 4009 4400, Email: [email protected]

Manoj Bahety

Deputy Head Research

[email protected]

Coverage group(s) of stocks by primary analyst(s): Media DB Corp, DEN Networks, Dish TV India, Hathway Cable & Datacom, Jagran Prakashan, PVR, Sun TV Network, Zee Entertainment Enterprises

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 158 59 12 229 * - stocks under review

Market Cap (INR) 156 62 11

Date Company Title Price (INR) Recos

Recent Research

22-Jul-16 DB Corp Ad hike playing out; digital sluggish ; Result Update

403 Buy

07-Jul-16 Media Ads on terra firma; Q1FY17 Result Preview

05-Jul-16 DB Corp Getting digital savvy; Visit Note

388 Buy

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to

One year price chart

250

300

350

400

450

500

Jul-1

5

Aug-

15

Sep-

15

Sep-

15

Oct

-15

Nov -

15

Nov-

15

Dec-

15

Jan-

16

Jan-

16

Feb-

16

Mar

-16

Apr-

16

Apr-

16

May

-16

Jun-

16

Jun-

16

Jul-1

6

(INR)

Zee Entertainment Enterprise



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Media

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