Zee Entertainment Q1, FY2021 Result Update - Why Share Gained 5% Despite Poor Results?

Stock Name: Zee Entertainment Enterprise Ltd.

NSE Code: ZEEL

BSE Code: 505537

Sector: Media and Entertainment

Market Cap: Rs. 19,157.26 Crore

P/E: 63.85  |  Industry P/E: 25.65

P/B: 2.50

EPS: 0.27  |   ROE: 25.56%   |  ROCE:  34.94%

Promoter Holding: 4.77% (As of 30th June 2020)

Quarterly Update

Zee Entertainment Enterprise Limited (ZEEL) share price has increased by more than 5% on Wednesday, post results. The market reacted positively to the company's quarterly earnings despite weak Q1 FY2021 figures. 

Key highlights: 

1. The consolidated net profit declined by 94.5% year on year from Rs. 529.8 Crore in the corresponding quarter last year to Rs. 29.3 Crore in Q1 FY2021.
2. The consolidated operating revenue dropped by 34.7% to Rs. 1312 Crore from Rs. 2008.1 crore in the corresponding quarter last year.
3. EBITDA declined by 66.7% to Rs. 219.9 Crore from Rs. 659.8 crore in Q1 FY2020.
4. Domestic ad-revenue declined by 67% to Rs. 219.9 crore in Q1 FY21 from Rs. 659.8 Crore in Q1 FY2020.
5. Steep ad decline has affected the company's operating profit. The reason for decline being the unprecedented COVID-19 lockdown which led to no fresh content production on the platform and severe restrictions were imposed on regular business activity. However, according to the company, content creation and some business activities have resumed due to ease in lockdown in various states and the company expects to generate higher ad revenues in the next quarter. The H2 FY2021 looks positive for the company.

Factors that led to an increase in share price: (A POSITIVE CHANGE)

1.    Improved governance measures are taken by the management of the company that included the reconstitution of board members and redrafting of their key policies such as surplus funds to be invested in only CD/ FD/ Debt MF with other restrictions such as a cap on investment in a single fund, minimum AUM of the fund, etc. 

2.    Key financial policies have been redrafted as per shareholders’ feedback and are available on the website. Improved financial disclosure measures are taken by the company. Transparency will be maintained in all related party transactions and any sort of investments made by the company. The aim of these measures is to increase the company's faith and credibility among investors.

3.    A sharp increase in viewership is been observed.

4.    ZEEL witnessed strong growth in subscription revenue, which increased by 5% to Rs. 744.34 Crore in Q1 FY2021 from Rs. 708.77 Crore in Q1 FY2020.

5.    The Q1 FY2021 results exceeded many brokerage firm's expectations.

Download PDF: ZEEL Earning Update Q1, FY2021

Disclaimer: This is not a stock recommendation, kindly consult your financial advisor before investing.

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