Dish TV India - Fast growing DTH subscriber base:: UBS

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UBS Investment Research
Dish TV India
Fast growing DTH subscriber base
􀂄 Raise price target to Rs70 (from Rs55)
Dish TV is the largest direct-to-home (DTH) operator in India with strong brand
presence and wide distribution network. Dish TV is a play on India’s growing
DTH subscriber base, we expect Dish TV to add 3.1m gross subs in FY11 (added
1.41m in 1HFY11) and 2.6m in FY12. We expect ARPU to grow from Rs139 in
FY10 to Rs146 in FY11 led by smart pricing moves taken by the company.
􀂄 Strong 2Q results: 630bps yoy EBITDA margin increase was +ve surprise
Dish TV stand-alone revenues grew 27% yoy to Rs3.3bn (UBS-e Rs3.4bn). Dish
TV added 0.76m subs in 2QFY11 (UBS-e 0.70). ARPU was in line with UBS-e at
Rs139. EBITDA grew 116% yoy to Rs498m, significantly ahead of UBS-e of
Rs406m. EBITDA margin expanded 630bps yoy to 15.3% (UBS-e 11.9%). Net
loss was better than expectations at negative Rs452m (UBS-e negative Rs561m).
􀂄 Catalysts: quarterly results, mandatory digitisation, licence fee reduction
Potential share price catalysts include: 1) strong quarterly performance in the next
2-3 quarters as we expect Dish TV’s ARPU to increase and EBITDA margins to
expand significantly starting 3QFY11. 2) Implementation of mandatory digitisation
as recommended by TRAI as it will lead to increase in DTH subscribers pick up. 3)
Likely reduction of license fee, which will further add improve EBITDA margin.
􀂄 Valuation: Maintain Buy rating
We derive our price target from a DCF-based methodology and explicitly forecast
long-term valuation drivers using UBS’s VCAM tool. We assume WACC of
12.7%. We raise EPS estimates from Rs (1.08)/0.00 to Rs (1.18)/0.31 for FY11/12.