ZEE Entertainment Enterprises Ltd (ZEEL) has received a bullish endorsement from Elara Securities, which has assigned a ‘Buy’ rating to the stock, projecting an impressive 80% upside. This comes despite ongoing challenges in the company’s advertising revenue streams, particularly when compared to pre-Covid performance levels.
Elara highlighted that ZEE’s FY25 advertising revenue stands at around 70% of its pre-pandemic levels. However, it anticipates a recovery, projecting a 7% year-on-year growth in FY26, primarily supported by the low base effect. Looking further ahead, the brokerage expects a stable medium-term growth trajectory of approximately 3.5%. ZEE’s strategic efforts to adapt to evolving advertising trends have also been acknowledged as key factors in its projected recovery.
Operational efficiency has been another positive aspect. In FY25, ZEE’s margins improved by 390 basis points, driven by cost optimization and significantly reduced losses in its OTT platform, ZEE5. Elara predicts a slight gain in EBITDA margins in the upcoming fiscal year. Notably, the valuation of ZEE Music—part of the broader company portfolio—is pegged at around ₹5,000–6,000 crore, aligning with similar listed players in the industry.
Elara emphasized that there is considerable potential for value unlocking, particularly in the core broadcasting business and digital segments. The firm has maintained its target price for ZEE at ₹200, valuing the broadcasting segment at 11x P/E on FY28E estimates and the OTT arm at 3x price/sales. According to Elara, this reflects an implied valuation of ₹1,700 crore for the core broadcasting business.
Despite a 24.6% year-on-year dip in Q4 advertising revenue—largely due to a viewership shift to sports content like the IPL and Champions Trophy—ZEE is recalibrating its focus. It is expanding its client base, targeting emerging businesses, and strengthening its presence in the ‘free-to-air’ channel space. Elara expects these initiatives to help drive a 7% growth in advertising revenue for FY26, particularly in the second half of the year as market demand picks up.
ZEE5 continues to show strong promise, with 15.8% year-on-year growth recorded in FY25. EBITDA losses in the ZEE5 segment also shrank by a notable 49.6% during the same period. Elara believes future improvements in this area will be driven more by revenue growth than cost-cutting.
Subscription revenue showed modest gains—up 0.4% sequentially and 3.9% year-on-year—reflecting a low base due to the delayed implementation of NTO 3.0. Looking forward, Elara projects a 4.6% compound annual growth rate (CAGR) in both advertising and subscription revenues through FY28, supported by better user acquisition and price-led revenue scaling.
