DISH TV -- Hockey stick curve comes to the fore:: Edelweiss,

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DISH TV INDIA
Hockey stick curve comes to the fore



􀂃 Q2FY11 revenues at INR 3,261 mn, in line with estimate
Q2FY11 revenues stood at INR 3,261 mn (against estimated INR 3,241 mn), up
26.7% Y-o-Y. Dish TV India (Dish TV) added 0.76 mn subscribers during the
quarter. As on September 30, 2010, the gross subscriber base stood at 8.3 mn
and net subscriber base at 6.8 mn. ARPU per month, however, remained flat at
INR 139 Q-o-Q. Dish TV hiked prices across two popular packs towards the end
of Q2FY11, the impact of which would be visible in the forthcoming quarters.
􀂃 EBITDA margins expanded sharply by 469bps Q-o-Q
EBITDA for Q2FY11, at INR 498 mn, was ahead of our estimate of INR 375 mn.
EBITDA margins expanded sharply from 10.6% in Q1FY11 to 15.3% in Q2FY11
on the back of operating leverage benefits, arising from fixed content cost deals
and robust subscriber additions. Content cost (as a percentage of subscription
revenues) dropped to an all-time low of 39%. Selling and distribution expense
(as a percentage of sales) declined 160bps Q-o-Q. Subscriber acquisition cost
(SAC) is down to INR 2,083 in Q2FY11 from INR 2,147 in the previous quarter.
􀂃 PAT level losses down to INR 452 mn against estimated INR 642 mn
Losses at the PAT level in Q2FY11 stood at INR 452 mn against INR 632 mn in
Q1FY11.
􀂃 Fund raising plans likely in future
Dish TV has taken an enabling resolution to raise USD 200 mn through equity
issuance. We believe this could be because of a greater pace of subscriber
addition (industry likely to add 12-13 mn annually against the estimated 8-9
mn). Fund raising would enable Dish TV to maintain its leadership with an
incremental market share of ~27-28%; it is subject to approvals from FIPB, MIB
(I&B ministry) apart from the AGM.
􀂃 Outlook and valuations: Attractive; maintain ‘BUY’
We are bullish on the Indian pay TV market. Dish TV is at an inflection point with
expected higher growth on the back of low penetration, favourable regulatory
environment, increasing margins, and a strong balance sheet. Hence, we
maintain our ‘BUY’ recommendation on the stock and rate it ‘Sector
Performer’ on relative return basis