Zee flat despite better Q1 margins

Shares of Zee Entertainment are ruling just about in the green at Rs. 380, up 1.4%, in line with the broader market, however with strong volumes of nearly 44 lakh shares exchanging hands on both the exchanges, post Q1 result announcement this morning. In the run-up to the results, share price had risen 7% in the last 5 trading sessions, and today, the counter is relatively ruling soft, seeing profit booking, despite good set of first quarter results.

While company’s June 2015 quarter advertising revenue increased 17% QoQ to Rs. 780 crore, subscription revenue, mainly domestic dipped 12% QoQ, thereby leading to 9% contraction in the overall subscription revenue to Rs. 463 crore. Despite flat revenue growth, company’s EBITDA surged 16% QoQ to Rs. 379 crore (EBITDA margin improved to 28.3% from 24.3% QoQ), thanks to tight control over advertising and other expenses, leading to net profit jumping 6% QoQ to Rs. 244 crore (net margin 18.2% versus 17.1% QoQ). Thus, Q1FY16 EPS improved to Rs. 2.16, vis-à-vis Rs. 2.02 in Q4FY15 and from Rs. 1.82 in Q1FY15.  

The company has also approved acquisition of Orissa’s no. 1 general entertainment channel, Sarthak, for cash consideration of Rs. 115 crore. The acquisition, to be funded from surplus cash of over Rs. 1,500 crore, as of 31-3-15, will be value accretive.