Zee Entertainment Shares Downgraded To 'Add' By Dolat Capital Post Weak Q1 Results — Check Target Price

Zee management has guided for 8-10% ad revenue growth and 18-20% Ebitda margin by FY26, with revenue-driven margin expansion. While being optimistic about diversification into retail and international markets to boost ad revenues, we acknowledge the execution risks, given management’s past track record. Further, litigation risks from TV18-Star post-merger, potential capital misallocation, cord-cutting, and shift of ad dollars to digital are additional challenges.

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Dolat Capital Report

Zee Entertainment Enterprises Ltd.’s Q1 FY26 was significantly weak. Domestic ad revenues declined steeply by 19% YoY. Revenue/Ebitda/adjusted profit after tax in Q1 came at -14/-16/-11% YoY, whereas for FY25 it grew by -4/+28/+36% YoY led by costs rationalization.

Following five consecutive years of Ebitda decline (FY19-24), the company witnessed a rebound in FY25. We expect Zee’s financials to benefit from-

1. revival in ad growth supported by a favorable base, further aided by mgmt efforts to widen and deepen the genre, geographic, and customer reach, as well as switch from PayTV to FTA,

2. reduced losses in the digital segment and

3. Operating leverage potential events like merger and acquisition or an increase in stake by Promoters (which could be an additional +ve trigger). Growth disappointment and misallocation of capital are key risks.

We reduce our FY26/27E Ebitda by 10/8% and EPS by 10/7% to factor weak near-term advertising outlook. Zee has ~Rs 22 billion but is partly offset by the risk of potential contingent liabilities.

We downgrade our rating by a notch to ‘Accumulate’ from ‘Buy’ with revised target price of Rs 150 @ 15x FY27E EPS (vs Rs 160 @16x FY27E earlier).

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