Stock Fundamentals

Zee Entertainment catches eyeballs

| Updated on January 26, 2013 Published on January 26, 2013

Zee Entertainment (Zee) delivered an attractive set of numbers in the recent December quarter, ahead of market expectations. During the period, the company’s revenues grew 26.3 per cent over the same period last fiscal to Rs 938.8 crore, while net profits rose 40.5 per cent to Rs 193.3 crore.

Advertising, which accounts for 54 per cent of Zee’s overall revenues, grew 28.8 per cent over the same period last year. Subscriptions (44 per cent of revenues) too witnessed a healthy improvement, with revenues from this stream growing 25.6 per cent. Both domestic and international subscriptions increased for the company.

Subscription revenues on the rise

Many of Zee’s regional entertainment channels (Zee Bangla, Zee Marathi, etc) and its flagship Zee TV continue to be among the top three-four channels in terms of viewership. This helps in garnering higher advertising revenues.

In terms of subscriptions, the telecom regulator’s mandate to digitise all analogue cable networks in the metros boosted revenues. While DTH operators continue to witness strong subscriber additions, large cable operators such as Den Networks and Hathway Cable too have witnessed steady traction in customer addition. With other large cities too to be digitised over the next couple of years, the possibility of garnering more subscription revenues increases for players such as Zee.

HUL's volumes take a hit

Hindustan Unilever (HUL) had a gloomy December 2012 quarter, with volumes expanding just 5 per cent compared to the same period last year. This augments the decline in volume growth from the once-strong 9 per cent. FMCG sales for HUL expanded by 15 per cent for the December 2012 quarter compared to the year ago period.

Some comfort lies in mainstay soaps and detergents segment growing a healthy 20 per cent with Surf and Rin clocking a double-digit growth in volumes. With an 18 per cent expansion, the beverages segment posted its second quarter of good growth, driven by teas and new launches in the Bru range.

Packaged foods returned to muted growth and also fell back into losses. Surprisingly, personal care too was lacklustre, growing 13 per cent, lower than the growth in earlier quarters. The December quarter is usually peak period of sales for personal care. Product lines such as face creams haven’t done well - discretionary spending is down, sale of low-priced sachets is up and competition is increasing.

Margins flat

Adspend as a proportion to sales rose 1 percentage point to 12.8 per cent for the December quarter. The higher adspend offset controls over other expenses. Operating margins remained at 16 per cent for the December quarter. HUL will also increase royalty payment in phases to Unilever from the current 1.4 per cent of turnover to 3.15 per cent, by March 2018. Given the gradual increase in these payouts, the effect on margins is likely to be minimal.

Published on January 26, 2013
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