Zee Telefilms proved the biggest gainer in the Sensex in afternoon trades, as the scrip baited broad buying as a result of its attractive valuation.

By 13:50 IST, the scrip of India's largest listed media company sprang forth 8.23% to Rs 82.85. It had achieved an even higher Rs 84.50 earlier. Its intra-day low was Rs 76.65. Substantial volumes of close to 6 million shares were recorded on the counter on BSE by 13:50 IST.

The scrip has been witnessing an upsurge over the last one month, rising 38% from its 52-weeek low of Rs 60.15 on 31 March 2003.

Apart from its attractive valuation, the scrip is buoyant due to its better-than-expected results.

For Q4 ended 31 March 2003, Zee Telefilms, on a consolidated basis, recorded a massive 75% rise in net profit to Rs 92.54 crore on a 15.8% increase in total sales to Rs 368.47 crore (Rs 3.68 billion). The company recorded an extraordinary expense of Rs 38.61 crore (as against nil in Q4 of last year), after which net profit was merely 2% higher at Rs 53.93 crore.

The results have proved above predictions by capitalmarket.com - a net profit of Rs 55-75 crore and net sales of Rs 288-326 crore.

For 2002-03, the company's net profit, on a consolidated basis after adjusting for extraordinary expenses, rose by 16.6% to Rs 227.03 crore (Rs 2.27 billion) on a 10.5% increase in total sales to Rs 1,199.32 crore (Rs 11.99 billion).

For the fourth quarter were also impressive. For Q4 (on a standalone basis), the company recorded a massive 134.65% rise in net profit to Rs 32.57 crore on an 8.6% increase in total revenue to Rs 150.98 crore (Rs 1.5 billion). Net profit rose due to a massive cost-cutting exercise. For the quarter, total expenses declined by 17.2% to Rs 84.82 crore. For the year (on a standalone basis), the company posted a net profit of Rs 87.49 crore on total income of Rs 497.44 crore (Rs 4.97 billion).

But analysts are wont to point out that the growth in profitability is largely due to cost cutting. This, analysts feel, cannot be sustained for a long period of time. Future growth continues to be a concern for the company.

Another positive for the scrip comes in the form of the proposed implementation of the conditional access systems from 14 July 2003. This should see subscription revenues spurt.

Zee Telefilms has also said that the business environment (in 2003-04) continues to be challenging in terms of advertising revenues, which are dependent on macro economic factors and the business confidence of major advertisers. However, the company remains confident that subscription revenues will continue to grow. The company does not anticipate any lasting impact of the Cricket World Cup on advertising revenues, which has been evident in the few weeks since the culmination of the event.

As on 31 March 2003, promoters held 51.77% stake in Zee Telefilms, while the public and institutions held 9.83% and 33.53% respectively.

BSE code: 505537