ViJiT
Vijith Pujari
Zee Telefilms Limited
Hold Target price: Rs 310
CAS regime would benefit in a big way: Recently, the Delhi High Court ordered for a speedy implementation of the Conditional Access System (CAS) in certain zones of the three metro cities (Mumbai, Delhi and Kolkatta). This is likely to boost revenues of broadcasters (with pay channels) in the long-term. Currently (pre-CAS regime), cable operators retain about 75%) of revenues from
subscriptions. This is done by underdeclaration of the number of paid cable households to broadcasters. The CAS regime is likely to improve declarations, as each subscriber will be accounted for by installing set-top boxes at the consumers end. Of the estimated 58 m cable TV subscribers in the country (estimated at 2.5 m in Mumbai), Siticable has a market share of 12%. This we expect to increase. Since costs are largely sunk, incremental revenues from higher declaration will directly flow to the bottomline. However, it must be noted that in our model, though we have upgraded Zee's subscription revenues, we have not assumed significant growth of the same, as the implementation may take time. However, the CAS/DTH regime will not only add to the pay revenues of Zee but also offer significant potential to maximize advertising revenues, as advertisers would be in a position
to select their target audience.
The stock currently trades at Rs 244 implying a price to earnings multiple of 15.7x our estimated FY08E earnings. We had recommended a BUY on the stock in April 2005 at Rs 132 with a price target of Rs 190. Considering the recent developments, we recommend a HOLD* on the stock at the current price with a price target of Rs 310.
Hold Target price: Rs 310
CAS regime would benefit in a big way: Recently, the Delhi High Court ordered for a speedy implementation of the Conditional Access System (CAS) in certain zones of the three metro cities (Mumbai, Delhi and Kolkatta). This is likely to boost revenues of broadcasters (with pay channels) in the long-term. Currently (pre-CAS regime), cable operators retain about 75%) of revenues from
subscriptions. This is done by underdeclaration of the number of paid cable households to broadcasters. The CAS regime is likely to improve declarations, as each subscriber will be accounted for by installing set-top boxes at the consumers end. Of the estimated 58 m cable TV subscribers in the country (estimated at 2.5 m in Mumbai), Siticable has a market share of 12%. This we expect to increase. Since costs are largely sunk, incremental revenues from higher declaration will directly flow to the bottomline. However, it must be noted that in our model, though we have upgraded Zee's subscription revenues, we have not assumed significant growth of the same, as the implementation may take time. However, the CAS/DTH regime will not only add to the pay revenues of Zee but also offer significant potential to maximize advertising revenues, as advertisers would be in a position
to select their target audience.
The stock currently trades at Rs 244 implying a price to earnings multiple of 15.7x our estimated FY08E earnings. We had recommended a BUY on the stock in April 2005 at Rs 132 with a price target of Rs 190. Considering the recent developments, we recommend a HOLD* on the stock at the current price with a price target of Rs 310.