Zee shares soar over 3% as Street cheers revenue numbers and ignores profit, margin miss

Shares of Zee Entertainment Enterprises Limited (ZEEL) rose as much as 3.76 percent to Rs 238.4 on Friday as the Street cheered the company's revenue beating estimates even as the profit and margin disappointed.

At 12:15 PM, the company's stock was trading 3.07 percent higher at Rs 236.80 per share on the BSE. The stock has been gaining for the last two sessions and has outperformed the sector by over half a percent.

The company’s revenue saw an year-on-year increase of 18.2 percent to Rs 2,322.9 crore as compared to Q4FY21.  However, ZEE disappointed on other fronts like profit (down 34 percent YoY), margin (down 660 basis points YoY), and earnings before interest, tax, depreciation and amortisation (EBITDA) (down 10 percent YoY).

A CNBC-TV18 poll had estimated the company’s profit for the March quarter at Rs 336 crore. Zee failed to deliver the number with the Q4 profit coming in at Rs 181.9 crore, way below the estimates. However, its EBITDA surpassed estimates of Rs 479 crore.

In an interview with CNBC-TV18, Rohit Gupta, CFO, Zee Entertainment Enterprises, explained that high input costs are impacting marketing spends of fast-moving consumer goods (FMCG) companies.

“We have seen a sharp rise in inflation and there is also high input cost for many companies. There is also the ongoing conflict between Ukraine and Russia. So, we know there are these headwinds going on and this has impacted the marketing spend of FMCG companies,” he said.

“Having said that, we are very confident that the overall ad revenue for the quarter will see marked improvement. We have already seen a healthy year in FY22 and we have seen recovery across all segments,” Gupta added.

He remains optimistic on the revenue trajectory from the digital business and expects it to continue in FY23 as well. “In our digital business, we have seen all the metrics are trending very well, revenue growth is also very healthy and I expect these trends to continue in FY23 as well on the back of investments that we are making in content and technology," said Gupta.

According to him, margin may be hit but will not go lower than the current year's numbers.

“At this moment, there are certain headwinds, which are affecting our ad revenue. But once this situation stabilises, we are going to see improvement in the margins," he said.