Due to ZEE Entertainment Enterprises Ltd.'s (ZEE) merger breakup with Sony earlier this year, the media company's shares have dropped 56% from their peak of Rs. 299.50 a share in December 2023, severely hurting retail investors.
Emkay Global stated in a recent note that while ZEE's board and management had started a thorough plan to assist the company reclaim its lost glory, it would be challenging to repeat the superior performance observed over FY13–19 given the changed business circumstances.
According to this view, before ZEE experiences any improvement, the short-term performance is probably going to go worse as a result of these efforts."We think that ongoing legal battles might sabotage present plans and merely make matters worse. Even while values are good, a general re-rating is unlikely to occur until a new partner or buyer emerges, according to Emkay Global. As of March 31, 6,11,394 individual investors had invested in ZEE, with a nominal share capital of up to Rs 2 lakhs. At the conclusion of the fourth quarter, they held a 22.97 percent ownership in the media company.
Further Emkay Global stated, "We reduced FY25–26E Ebitda by 10%–12% in order to account for a slower rate of recovery. Although there has been a significant 24% correction since our last assessment and there is still further downside from present levels, we upgrade ZEE to Reduce while keeping our bearish outlook. The statement read, "We reduce our target price to Rs 150 per share (8x Mar-26E Broadcasting EBITDA)."
ZEE shares were up 0.22 percent, or Rs 136.95, after the close on Tuesday. The target price set by Emkay Global indicates a possible upside of 9.52% over present pricing. ZEE's near-term performance is expected to worsen from present levels as it takes steps to meet its FY26 objectives, according to the brokerage business.
Zee5, which has been bringing down the company's margins overall, may be affected and experience a temporary halt in sales as the emphasis now turns more toward cutting losses. The company's legal problems also extend to the Sony merger case, the Disney Star cricket licensing dispute, and Punit Goenka's continuing SEBI issue.
"We believe that any negative choices made against the firm might lead to more suffering and the disruption of present ambitions. We think the company is facing a challenging business climate at the moment, especially because it is up against Disney-Reliance together as a larger organization," the statement said.
ZEE has opted to pursue expansion and strategic prospects by withdrawing its merger implementation application that was submitted to the NCLT. A significant catalyst for a stock re-rating, according to Emkay, would be the appearance of a new partner.
"On a 1YF EV/EBITDA ratio, the company is presently trading at its lowest value in the past ten years, which is a strong indication of the tight situation it is in. Since the merger breakup, the stock price has dropped precipitously, and given the absence of catalysts in the near future, it may continue to sag, according to Emkay.
