Prabhudas Lilladher has given Buy recommendation for Zee Entertainment Enterprises with a target price of Rs. 303 in its research report issued on Sep 15, 2021

Prabhudas Lilladher’s research report on Zee Entertainment Enterprises

In a case of shareholder activism, two large shareholders of ZEEL holding ~18% in equity have called for an EGM to reconstitute the current board. Specifically, three replacements are being sought including Mr Punit Goenka, current MD&CEO. Further, institutional investors have also suggested inducting six new names into the board. While the existing management had taken steps to improve corporate governance & disclosure practices, given that the promoter shareholding was just 4% odd, a rejig was expected. We believe, if a professional board takes over, decisions surrounding non-core investment in Sugar-Box (existing management was already going slow) and expansion of highly volatile and margin dilutive movie production business may be revisited. Though the core broadcasting business is still not out of the woods (network share was down 190bps QoQ to 17% in 1QFY22), board reconstitution and improvement in user engagement metrics of ZEE5 is likely to drive re-rating from here on.

Outlook

Consequently, we increase our target P/E multiple to 18x (earlier 15x) and arrive at a TP of Rs303 (earlier Rs253).

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