Target: ₹131
CMP: ₹104.80
In Q2 FY26, Zee Entertainment Enterprises Ltd (ZEEL) reported a marginal decline of about 2 per cent in overall revenue on a y-o-y basis, primarily weighed down by an about 11 per cent drop in advertising revenue amid continued softness in FMCG spending and weak macros. This weakness was partly neutralised by a about 5 per cent growth in subscription revenue on a y-o-y basis, led by sustained momentum in ZEE5.
On the profitability front, jump in marketing spends was mainly due to the relaunch of the Kannada and Bangla GEC channels resulted in an EBITDA contraction of 808 bps on a y-o-y basis. However, a portion of these expenses is considered one-off in nature. Looking ahead, the Company remains cautiously optimistic on the revival of advertising demand, supported by festive tailwinds and improving consumption trends.
Additionally, ZEE5 continues to demonstrate healthy traction and continues to progress toward breakeven, driven by disciplined cost control and a sharper focus on regional-language content.
However, growth momentum continues to lag, and a recovery is expected with improvement in the overall advertising environment in H2 FY26.
At current prices, the stock seems to be pricing in more negativity than what the fundamentals suggest. Therefore, based on our revised estimates, we maintain our Buy rating on ZEEL with a target price of ₹131 (~20x FY27E earnings).