CLSA believes that the Zee Entertainment share price can double over the next 12-24 months. The international brokerage believes that Zee Entertainment share’s valuation has hit a rock bottom at 8x PE as it has been in a downward spiral since the Sony merger was called off in January 2024 . It has slumped 55% since then.
CLSA on Zee: Ad revenue-led growth to help rerate stock
CLSA pointed out that they expect advertising revenue-led growth will rerate the stock. Zee is currently India’s No.2 TV network and is ramping up OTT/ZEE5. The company’s EBITDA margin has widened by 9 ppt from lows and it has zero debt (Rs 1700 crore cash). Even assuming 6% YoY ad growth, CLSA expects the entertainment major to “deliver 22-33% EBITDA/PAT CAGRs in FY26-27.” This is because, they explained that Zee’s mkt cap/sales of 1x is at a 60-80% discount to the Reliance Disney JV and Sun TV.
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Zee is India’s No.2 TV network and “is also ramping up its own over the top (OTT) streaming service ZEE5. In India, despite the digital media ramp-up, TV is still a 900m- reach medium, higher than digital. Also the sector has consolidated with Reliance- Disney’s Star JV,” added CLSA. According to them, the TV ad spend remains below pre-Covid levels due to domination (over 50% ) by FMCG, (which has faced headwinds). As a result, they “expect single digit TV ad spend growth but forecast 12% YoY ad growth for Zee over FY26/27.”
CLSA on Zee: Expanding margin and cash
Another key factor supporting the bullish call from CLSA is Zee’s 0 debt on the books and Rs 1700 crore cash on the balance sheet. The media major’s EBITDA margin already widened by 9 ppt to 16% in the latest quarter from the low of Q4FY23 and they “expect another 6 ppt expansion to 22% by FY27. The margin expansion was led by 60% loss reduction from the peak of Rs 340 crore in Q1FY24 for OTT/ZEE5.”
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Given Zee’s sector positioning and improving profitability,
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