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UBS Investment Research
Dish TV India
Management meeting takeaways
Subscriber additions to remain strong in FY12
Dish TV is likely to report 3.4-3.5m gross subscriber additions in FY11 (Dish TV
has added 2.5m subscribers in 9M FY11). Dish TV has further added more than
300,000 gross subscribers in January 2011. Given a sports-heavy calendar in 2011,
subscriber additions are likely to remain strong in FY12. We expect Dish TV to
add 3.4m in FY11 and 2.8m subscribers in FY12.
Content costs as % of sales to decline in FY12
Dish TV has entered into fixed contracts for content with most large broadcasters.
Dish TV expects content costs to decline as percentage of sales in FY12 given only
one contract will get renewed in FY12. We expect content costs to decline to
35.5% of revenue in FY12 and increase to 36.0% of revenue in FY13.
Other takeaways
1) FY12 is likely to be a landmark year for Dish TV as the company is likely to
achieve net profit and FCF breakeven. 2) Dish TV is likely to receive around
Rs700m from related companies in Q4 FY11 and around Rs900m in FY12. 3)
Steady-state EBITDA margin is likely to be in the range of 28-32% (at ~13m gross
subscribers).
Valuation: maintain Buy with DCF-based price target of Rs77
The Dish TV stock price has declined 22% on an absolute basis and 10% relative
to the BSE Sensex YTD 2011. We view any further weakness in the stock price as
an opportunity as Dish TV remains the only listed pure play on India’s fastgrowing
DTH subscriber base.
Dish TV India
Dish TV commenced operations in October 2003 and is the first and the largest
DTH operator in India with 5.7m subscribers in FY10. It is part of Essel Group,
a media conglomerate, and was formed after the demerger of Zee
Entertainment's Direct Consumer Services business. Dish TV was listed in April
2007 and recently raised Rs4.16bn in the third and final tranche of a rights issue.
It also received funding of US$100m (Rs4.65bn) from US-based Apollo
Management, through a GDR issue.
Statement of Risk
We believe the key risks for Dish TV are: 1) intense competition from other
DTH operators as well as large multi-system operators that offer digital cable
and 2) regulatory risks. We believe content costs could increase for Dish TV if
broadcasters negotiate a variable fee structure based on the number of
subscribers. Dish TV is also exposed to currency risks as it imports set top boxes.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Dish TV India
Management meeting takeaways
Subscriber additions to remain strong in FY12
Dish TV is likely to report 3.4-3.5m gross subscriber additions in FY11 (Dish TV
has added 2.5m subscribers in 9M FY11). Dish TV has further added more than
300,000 gross subscribers in January 2011. Given a sports-heavy calendar in 2011,
subscriber additions are likely to remain strong in FY12. We expect Dish TV to
add 3.4m in FY11 and 2.8m subscribers in FY12.
Content costs as % of sales to decline in FY12
Dish TV has entered into fixed contracts for content with most large broadcasters.
Dish TV expects content costs to decline as percentage of sales in FY12 given only
one contract will get renewed in FY12. We expect content costs to decline to
35.5% of revenue in FY12 and increase to 36.0% of revenue in FY13.
1) FY12 is likely to be a landmark year for Dish TV as the company is likely to
achieve net profit and FCF breakeven. 2) Dish TV is likely to receive around
Rs700m from related companies in Q4 FY11 and around Rs900m in FY12. 3)
Steady-state EBITDA margin is likely to be in the range of 28-32% (at ~13m gross
subscribers).
Valuation: maintain Buy with DCF-based price target of Rs77
The Dish TV stock price has declined 22% on an absolute basis and 10% relative
to the BSE Sensex YTD 2011. We view any further weakness in the stock price as
an opportunity as Dish TV remains the only listed pure play on India’s fastgrowing
DTH subscriber base.
Dish TV India
Dish TV commenced operations in October 2003 and is the first and the largest
DTH operator in India with 5.7m subscribers in FY10. It is part of Essel Group,
a media conglomerate, and was formed after the demerger of Zee
Entertainment's Direct Consumer Services business. Dish TV was listed in April
2007 and recently raised Rs4.16bn in the third and final tranche of a rights issue.
It also received funding of US$100m (Rs4.65bn) from US-based Apollo
Management, through a GDR issue.
Statement of Risk
We believe the key risks for Dish TV are: 1) intense competition from other
DTH operators as well as large multi-system operators that offer digital cable
and 2) regulatory risks. We believe content costs could increase for Dish TV if
broadcasters negotiate a variable fee structure based on the number of
subscribers. Dish TV is also exposed to currency risks as it imports set top boxes.
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