Emkay Global Financial has given Buy recommendation for Zee Entertainment with a target price of Rs. 430 in its research report issued on Dec 22, 2021

Emkay Global Financial’s report on Zee Entertainment

Sony Pictures Networks India (SPNI) and ZEEL have signed a definitive agreement to merge ZEEL with and into SPNI. Under the deal, the entities’ linear networks, digital assets, production operations and program libraries will be combined. Post deal closing, SPNI will have a cash balance of USD1.5bn, including USD1.06bn through a rights issue by the current SPNI shareholders and a fund infusion from ZEEL promoters. With a 50.9% stake, Sony will retain management control of the new entity. With the merger agreement signed, key things to watch out for now will be Invesco’s support for the merger, timely regulatory approvals, smooth integration, strategic roadmap for OTT investments, and recovery in Zee’s viewership share in select core markets.

Outlook

We have adjusted our pro-forma estimates assuming that the benefits from the merger will start reflecting from FY24 vs. FY23 earlier. Maintain Buy with a revised Mar’23E TP of Rs430 (11x Mar’24E pro-forma broadcasting EBITDA).

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