Zee Entertainment's FIFA subscription boost fails to offset weak linear TV margins

Investment View and Rating

Motilal Oswal’s November 1, 2026 results update on Zee Entertainment retains a Neutral rating and reduces the target price to Rs 70 from Rs 80. The broker believes a sustainable recovery in advertising revenue is necessary for a re-rating, but remains cautious because FMCG advertising spending on linear platforms has slowed and domestic advertising revenue has declined about 37 per cent over FY19 to FY26.

Motilal Oswal expects the structural migration of advertising expenditure to digital media to remain a downside risk.

2QFY27 Financial Performance

Zee Entertainment reported consolidated revenue of Rs 2,224.6 crore in 2QFY27, up 13 per cent YoY and 17 per cent QoQ, marginally above Motilal Oswal’s estimate of Rs 2,190.6 crore. The revenue performance was primarily supported by FIFA World Cup 2026 broadcasting.

Profitability and Segment Performance

Profitability remained weak despite the revenue boost. Consolidated EBITDA fell 52 per cent YoY and 10 per cent QoQ to Rs 70.8 crore, which was 17 per cent below Motilal Oswal’s estimate. EBITDA margin contracted 425 basis points YoY to 3.2 per cent.

Programming costs increased about 14 per cent YoY, while advertising and promotional expenditure rose 55 per cent YoY because of FIFA 2026 marketing. Employee cost declined about 8 per cent YoY and other expenses were stable.

ZEE5 revenue doubled YoY to Rs 630 crore on FIFA-led subscriber additions and higher engagement. Its EBITDA improved to Rs 41.6 crore from Rs 4.4 crore in 1QFY27. In contrast, linear TV revenue declined about 3.6 per cent YoY and linear TV EBITDA fell about 84 per cent YoY, with margin declining 8.9 percentage points YoY to 1.8 per cent.

Management Outlook

Management was cautiously optimistic about 2HFY27, citing festive advertising demand, a stronger content pipeline and continued digital subscriber monetisation. Management indicated that around 35 per cent to 40 per cent of FIFA-acquired subscribers have been retained.

It expects investments in sports, multilingual programming and customer acquisition to support revenue growth and retention, with profitability improving as upfront investment intensity moderates.

Estimates and Valuation

Motilal Oswal reduced its FY27E and FY28E EBITDA estimates by about 11 per cent due to the subdued advertising environment and higher content investments. Its revised estimates are as follows:

The broker forecasts only a 2 per cent revenue CAGR over FY26 to FY29E and expects FY29E EBITDA and PAT to remain below FY25 levels. The Rs 70 target price is based on 12 times December 2028E EPS of Rs 5.8, implying about 6 per cent upside from the Rs 66 CMP.