Company Report | Q2FY12 Result Update

LONG TERM INVESTMENT CALL

19 October 2011 Industry CMP (INR) Target (INR) 52 week High/Low (INR) Market Cap (INR BN) 3M Avg. Daily Volumes (000) P/E (FY12e) Media 113 128 300/106 110.5 2083.7 18x Q2FY12 Result Highlights

Accumulate

Shareholding Pattern (%)

The ZEEL numbers were little disappointing, in the advertisement front with 4% decrease in advertisement revenue on YoY basis from INR 4121.5 mn to INR 3949.3 mn. Subscription revenue registered a growth of ~6% to INR 2910.4 mn from INR 2736.8 mn on YoY basis. Other sales and services registered a growth of 26% on YoY basis. However, the company registered a higher EBITDA margin of 28.9% from 26.5% in 2QFY11 driven by lower sport cost. The company registered of growth of 23.6% in bottom line driven by lower tax rate and other income. The subscription revenue and expenditure for Q2 FY2012 are not comparable to those for Q2 FY2011 because of the change in accounting treatment of domestic subscription revenues, which are now being reported net of expenses.

The advertising revenue registered a growth of ~4% on QoQ basis, which was below our expectations. While the non-sports business registered a modest growth in of low single digit. Sports revenue was also lower as there was some India-centric cricket properties showcased in 2QFY11. On subscription front, revenues are not comparable as they are being reported as net of expenses basis. The accounting treatment was changed after the formation of Media Pro - a Joint venture between Star and ZEEL, which pays subscription revenues on net of expenses basis. Subscription revenues from international operations were down 3% on YoY basis. The sports business registered a loss of INR 1.1 bn as compared to a loss of INR 1.7 mn in 2QFY11. The company reported a revenue INR 881 mn in the 2QFY12 as compared to INR 1.1 bn in 2QFY11.

Stock Performance

Outlook & Valuation Performance (%) 1 Month -1.1% ZEEL NIFTY -0.9% The management has guided a sluggish advertisement growth for the H2FY12. In addition lower rating in its flagships channel Zee Tv can put pressure on the ad yields. Moreover, the company is increasing original weekly programming hours from 28hr to 29hr which can put pressure on the margins going forward. At the CMP the stock is trading at 18x and 15x for FY11E and FY12E. We maintain Accumulate on the stock with price objective of 128. The company is running a buy back program at a maximum price of INR 126 till March 2012, which is expected to act as a support for the price.

3 Months -9.9% -8.8%

1 Year -17.3% -17.1%

* Source: Bloomberg, Unicon Research

Wealth Research, Unicon Financial Intermediaries Pvt Ltd. Email: wealthresearch@unicon.in

Financials
(INR in mn)

Q2FY12 Net Revenue Operating Exp. EBITDA EBITDA (%) Depreciation Other Income EBIT EBIT (%) Interest PBT Tax Provision Tax Rate (%) PAT Minority interest Reported PAT Reported PAT (%)
Source: Company, Unicon Research *Consolidated

Q2FY11 7115.7 5230.4 1885.3 26.5 56.3 239.7 2068.7 29.1 4.7 2064.0 801.0 38.8 1263.0 0.6 1262.4 17.7

Y-o-Y 1.0 -2.3 10.1 240 bps 38.9 16.5 10.0 9 bps 1085.1 7.6 -22.4 -27.9 26.7 6516.7 23.6 22 bps

Q1FY12 6983.0 5422.6 1560.4 22.3 89 255 1726.2 24.7 30 1695.8 394.20 23.2 1301.6 -35.20 1336.8 19.1

Q-o-Q 2.9 -5.8 33.0 655 bps -11.8 9.7 31.9 28 bps 83.2 31.0 57.6 20.3 22.9 -212.8 16.7 13 bps

7183.8 5108.3 2075.5 28.9 78.2 279.3 2276.6 31.7 55.7 2220.9 621.2 28.0 1599.7 39.7 1560.0 21.7

Wealth Research, Unicon Financial Intermediaries Pvt Ltd. Email: wealthresearch@unicon.in

Unicon Investment Ranking Methodology

Rating Return Range Buy >= 20% Accumulate 10% to 20% Hold -10% to 10% Reduce -10% to -20% Sell <= -20%

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Wealth Research, Unicon Financial Intermediaries Pvt Ltd. Email: wealthresearch@unicon.in