S& P 500 hits all time highs U.S.-Japan trade deal optimism
On Friday, Zee Entertainment Enterprises (NSE:ZEE) Ltd. (Z:IN) received an upgraded stock rating from Prabhudas Lilladher, moving from Hold to Buy, accompanied by a revised price target of INR137.00. The upgrade is attributed to a consistent improvement in the company's operating performance over the last four quarters.
Prabhudas Lilladher analysts have increased their earnings per share (EPS) estimates for Zee Entertainment by 6% for fiscal year 2026 and 2% for fiscal year 2027. The firm's decision to lift the stock's rating is based on a revised target multiple from 10x to 11x. This adjustment reflects Zee Entertainment's resilience in a challenging advertising environment, where the company has managed to outperform expectations.
Zee Entertainment reported an EBITDA margin of 13.1%, surpassing the projected 12.5%, which was largely driven by cost optimization efforts and reduced losses in its digital platform, ZEE5. For fiscal year 2025, the company's content and employee costs decreased by 10.4% and 9.0%, respectively, and the operating loss in ZEE5 was almost cut in half, resulting in a 390 basis points increase in EBITDA margin.
Despite the current weak advertising environment, Prabhudas Lilladher anticipates a compound annual growth rate (CAGR) of 8.0% in advertisement revenue from a low base in fiscal year 2025. This is expected to contribute to a 440 basis points expansion in EBITDA margin over the next two years, thanks to the cost reset. The analysts note that the full potential of operating leverage benefits from the ongoing cost optimization may be currently overshadowed by the weak ad environment.
The firm's upgrade also considers Zee Entertainment's earnings recovery and attractive valuations, citing a forward price-to-earnings ratio of 10.4x for fiscal year 2026 and 8.9x for fiscal year 2027. The new target price of INR137 is set at 11 times the estimated EPS for fiscal year 2027.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.