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Driving the digital revolution
Dish TV is set to ride the J-curve growth that will make India’s direct-tohome
(DTH) subscriber base the largest worldwide. With a critical mass of
10m users, the firm should enjoy a 54% Ebitda Cagr to FY14 on operatingleverage
gains, while the turnaround in cashflow and FY10 equity-raising
mean it is funded for growth. We upgrade the stock from Outperform to
BUY with a Rs85 DCF-based target price and upside potential from pending
legislation on digitisation, licence-fee cuts and higher Arpu.
Leader in a hypergrowth industry
Direct to home (DTH) has been the catalyst for India’s journey to digitalisation.
We see this medium, rather than cable, as the primary beneficiary of the high
growth in new digital subscribers.
Affordability of digital TV has improved significantly in recent years.
Given India’s large TV market of 143m households and the fragmentation of the
local cable industry, DTH users should double to 60m in three years.
Dish TV, the leader in the six-player market, should see 80% growth in subscribers,
to 18m in this period and to 29m by FY20CL.
Ebitda surge as investments pay off
Dish TV should see a strong 54% Ebitda Cagr over FY11-14 and be in the black by
the end of this period, as operating-leverage gains kick in.
Better spread of the content costs will drive a 10ppt Ebitda-margin expansion.
We see room for upside to our estimates from favourable legislation on tariffs and
potential licence-fee reduction.
Funded for growth
Following an equity fundraising in FY10 and the turnaround in operating cashflow,
Dish TV's balance sheet is improving.
With Rs4bn in cash and a turn in cashflow, it is adequately funded to meet our
growth projections and should turn free-cashflow-positive post capex in FY13.
DCF suggests 28% upside
While global peers are in a mature growth phase, Dish TV should sustain a 21%
Ebitda Cagr even beyond FY14.
In that context, its valuation at 9.1x FY14CL Ebitda and a 10% premium to its
closest listed comparable, BSkyB, looks justified.
We value the stock using DCF given the swing in its cashflow profile. Our Rs85
target suggests 28% upside; stronger Arpu could push this to 47%.
Higher-than-expected subscriber churn and diversification are key risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Driving the digital revolution
Dish TV is set to ride the J-curve growth that will make India’s direct-tohome
(DTH) subscriber base the largest worldwide. With a critical mass of
10m users, the firm should enjoy a 54% Ebitda Cagr to FY14 on operatingleverage
gains, while the turnaround in cashflow and FY10 equity-raising
mean it is funded for growth. We upgrade the stock from Outperform to
BUY with a Rs85 DCF-based target price and upside potential from pending
legislation on digitisation, licence-fee cuts and higher Arpu.
Leader in a hypergrowth industry
Direct to home (DTH) has been the catalyst for India’s journey to digitalisation.
We see this medium, rather than cable, as the primary beneficiary of the high
growth in new digital subscribers.
Affordability of digital TV has improved significantly in recent years.
Given India’s large TV market of 143m households and the fragmentation of the
local cable industry, DTH users should double to 60m in three years.
Dish TV, the leader in the six-player market, should see 80% growth in subscribers,
to 18m in this period and to 29m by FY20CL.
Ebitda surge as investments pay off
Dish TV should see a strong 54% Ebitda Cagr over FY11-14 and be in the black by
the end of this period, as operating-leverage gains kick in.
Better spread of the content costs will drive a 10ppt Ebitda-margin expansion.
We see room for upside to our estimates from favourable legislation on tariffs and
potential licence-fee reduction.
Funded for growth
Following an equity fundraising in FY10 and the turnaround in operating cashflow,
Dish TV's balance sheet is improving.
With Rs4bn in cash and a turn in cashflow, it is adequately funded to meet our
growth projections and should turn free-cashflow-positive post capex in FY13.
DCF suggests 28% upside
While global peers are in a mature growth phase, Dish TV should sustain a 21%
Ebitda Cagr even beyond FY14.
In that context, its valuation at 9.1x FY14CL Ebitda and a 10% premium to its
closest listed comparable, BSkyB, looks justified.
We value the stock using DCF given the swing in its cashflow profile. Our Rs85
target suggests 28% upside; stronger Arpu could push this to 47%.
Higher-than-expected subscriber churn and diversification are key risks.
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