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No positive surprise
Dish TV’s 1QFY12 results were inline with revenue up 6%QoQ and Arpu
flat at Rs150. Ebitda margins expanded 360bps QoQ to 24%, enabling an
Ebitda increase of 25%QoQ, which was ahead of estimates. Meanwhile,
regulatory boosts on licence fees and digitalisation are still uncertain with
government legislation pending. With no positive surprise, we maintain
our forecasts. The stock has rallied 40% in the past three months to our
target price and currently trades at 15x FY13CL EV/Ebitda. With no nearterm
upside, we downgrade from BUY to Outperform.
Revenue growth of 6%QoQ in line and no Arpu improvement
Dish TV’s 1QFY12 revenue increased 6% QoQ and 51% YoY to Rs4.6bn, of
which 85% was direct-to-home (DTH) subscriptions. On the back of Dish TV’s
robust 725,000 subscriber additions (although down 28% QoQ), the gross
DTH subscriber base stands at 11.2m while the net figure is 8.9m (net
additions were 426,000 down 45% QoQ) as monthly churn increased to
1.1%. Arpu remained flat QoQ (up 8% YoY) at Rs150 and the high-definition
(HD) subscribers activation witnessed a slowdown (from 7% of monthly net
additions) after the Cricket World Cup. Ebitda margin expanded 360bps QoQ
(14ppts YoY) to 24% aided by 28% QoQ reduction in selling/distribution
expenses and may not be sustainable amid intense competition. Although
Dish TV’s quarter direct and content cost increased 4ppts QoQ to 34% of
revenue, these are still down 6ppts YoY aided by fixed fee content
interconnect agreements with the majority of broadcasters. Margins aided
Dish TV’s quarter loss, which reduced 51% QoQ to Rs183m.
Regulatory boosts on licence fee and digitisation still uncertain
A significant regulatory boost for Dish TV/DTH industry stems from a
potential licence-fee reduction via a change in accounting from 10% of
gross revenue to adjusted gross revenue (AGR) as well as a cut in licence
fees from 10% to 6-8%. However, government legislation here is still
pending: in the interim Dish TV continues to provide for this at 10% of
gross revenue. Also, government legislation and implementation of the
proposed sunset date of 2014 on pan-India digitalisation and 31 March
2012 for four metros is pending. When implemented, this could be a
significant catalyst for Dish TV subscriber additions, since it will force
households to choose a set-top box from either DTH or digital cable. For
now, Dish TV DTH service cost is up 30% and we forecast Dish TV to
reach 15.3 million gross and 12.5 million net subscribers by FY13.
Maintain forecasts, downgrade to O-PF.
With no positive surprise in Dish TV’s quarterly results, we maintain our
forecast of a 67% Ebitda Cagr and DCF-based target price of Rs93. With
no near-term upside after the 40% rally in the stock over the past three
months and high uncertainty on implementation of the regulatory boost,
we downgrade the stock from BUY to Outperform, although the pending
legislation on licence fees and digitisation are significant positives.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
No positive surprise
Dish TV’s 1QFY12 results were inline with revenue up 6%QoQ and Arpu
flat at Rs150. Ebitda margins expanded 360bps QoQ to 24%, enabling an
Ebitda increase of 25%QoQ, which was ahead of estimates. Meanwhile,
regulatory boosts on licence fees and digitalisation are still uncertain with
government legislation pending. With no positive surprise, we maintain
our forecasts. The stock has rallied 40% in the past three months to our
target price and currently trades at 15x FY13CL EV/Ebitda. With no nearterm
upside, we downgrade from BUY to Outperform.
Revenue growth of 6%QoQ in line and no Arpu improvement
Dish TV’s 1QFY12 revenue increased 6% QoQ and 51% YoY to Rs4.6bn, of
which 85% was direct-to-home (DTH) subscriptions. On the back of Dish TV’s
robust 725,000 subscriber additions (although down 28% QoQ), the gross
DTH subscriber base stands at 11.2m while the net figure is 8.9m (net
additions were 426,000 down 45% QoQ) as monthly churn increased to
1.1%. Arpu remained flat QoQ (up 8% YoY) at Rs150 and the high-definition
(HD) subscribers activation witnessed a slowdown (from 7% of monthly net
additions) after the Cricket World Cup. Ebitda margin expanded 360bps QoQ
(14ppts YoY) to 24% aided by 28% QoQ reduction in selling/distribution
expenses and may not be sustainable amid intense competition. Although
Dish TV’s quarter direct and content cost increased 4ppts QoQ to 34% of
revenue, these are still down 6ppts YoY aided by fixed fee content
interconnect agreements with the majority of broadcasters. Margins aided
Dish TV’s quarter loss, which reduced 51% QoQ to Rs183m.
Regulatory boosts on licence fee and digitisation still uncertain
A significant regulatory boost for Dish TV/DTH industry stems from a
potential licence-fee reduction via a change in accounting from 10% of
gross revenue to adjusted gross revenue (AGR) as well as a cut in licence
fees from 10% to 6-8%. However, government legislation here is still
pending: in the interim Dish TV continues to provide for this at 10% of
gross revenue. Also, government legislation and implementation of the
proposed sunset date of 2014 on pan-India digitalisation and 31 March
2012 for four metros is pending. When implemented, this could be a
significant catalyst for Dish TV subscriber additions, since it will force
households to choose a set-top box from either DTH or digital cable. For
now, Dish TV DTH service cost is up 30% and we forecast Dish TV to
reach 15.3 million gross and 12.5 million net subscribers by FY13.
Maintain forecasts, downgrade to O-PF.
With no positive surprise in Dish TV’s quarterly results, we maintain our
forecast of a 67% Ebitda Cagr and DCF-based target price of Rs93. With
no near-term upside after the 40% rally in the stock over the past three
months and high uncertainty on implementation of the regulatory boost,
we downgrade the stock from BUY to Outperform, although the pending
legislation on licence fees and digitisation are significant positives.
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