ZEE shares jump ahead of NCLT decision on Sony merger

After hearing all arguments, NCLT will pronounce its order on ZEE Entertainment Enterprises Ltd (ZEE) regarding the Sony merger later today. The development would be crucial for ZEE that, a day ago, reported Rs 53.4 crore in losses for the June quarter against a profit of Rs 106 crore in the same period last year.

The current valuations for ZEE do not appear to justify the strong potential of the merged entity, aided by its strong competitive position in both linear and digital segments and, thus, the NCLT judgment on merger and its completion would remain a key monitorable, said Motilal Oswal Securities as it suggested a share price target of Rs 280 on the ZEE stock based on 26 times expected FY25 EPS.

At 10 am, the stock was trading 1.07 per cent higher at Rs 244.70 on BSE.

Emkay Global said the merger timelines remain critical for ZEE’s fortunes as it suggested a target of 265 on the stock. “ZEE has argued that Punit Goenka’s case with Sebi and the merger are two separate cases. Apart from this particular case related to the appointment of the MD and CEO, there is no change in any other clause,” Emkay said.

Emkay said ZEE’s viewership in Q1 was impacted by IPL and pickup in kid’s genres. That said ZEE’s market share in June was the highest in the last five quarters. It is the fastest-growing network in the South, based on viewership, Emkay said.

“We retain BUY with a revised target of Rs 265 (roll forward to Sep-25E, 8x Broadcasting Ebitda). In case the merger falls through, there could be significant downside from current levels, in our view,” it said.

An unfavorable NCLT verdict –ZEE Entertainment has right to appeal in NCLAT in that case, and slower recovery in ad environment can act as a key overhang in the near term, said Prabhudas Lilladher.

“Though we cut our FY24E EPS estimates by 19-odd per cent amid weak performance in Q1FY24 our FY25E EPS estimate is broadly intact as gradual recovery in ad-spends, accrual of full benefits of NTO 3.0 and loss moderation in ZEE5 is likely to aid earnings. Zee Entertainment Enterprise’s operational performance was marginally better than our expectation with Ebitda margin of 7.8 per cent (PL estimate of 6.3 per cent) but PAT was derailed by an exceptional charge of Rs 70.60 crore,” it said. Business Today