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UBS Investment Research
Hathway Cable & Datacom
M anagement meeting takeaways
Takeaways from meeting with Hathway CFO post 1QFY12 results
1) Hathway lowered its FY12 digital subs addition guidance from 800k to 500k
(UBS-e 415k) as it believes phase I of digitization deadline could get delayed by 1-
2 quarters. 2) Hathway has started offering higher bandwidth broadband plans (2 /
5 mbps) and has raised package prices, which led to ~Rs25 improvement in
broadband ARPU in 1Q. 3) Hathway believes cost cutting initiatives and higher
placement revenues (management estimates FY12 placement revenues to grow
15% vs. UBS-e 10%) will contribute to EBITDA growth in the next 2-3 quarters.
Maintain earnings estimates for FY12
Based on the recent quarterly disclosure, we calculate 1Q consolidated EBITDA to
be Rs407m (+9% yoy) – this is ahead of UBS-e Rs360m and consensus estimate of
Rs350m. We are 18-24% below consensus on FY12-13E EBITDA forecast. We
assume mandatory digitisation will get implemented in FY13.
Hathway benefits from cable digitisation
Hathway remains to be a long-term growth story and a play on cable digitisation in
India. We believe implementation of mandatory digitisation is imminent and would
benefit Hathway, given it has digital cable infrastructure in place and subs reach of
8.7m homes – 82% of which is a part of Phase I and Phase II implementation.
Valuation: Maintain Buy with PT of Rs130, execution key to re-rating
We value Hathway at 8.5x FY13E EV/EBITDA. We believe execution remains
key for Hathway’s stock price re-rating. We prefer Dish TV due to its better
execution and earnings visibility.
Hathway Cable & Datacom
Hathway Cable & Datacom (Hathway) began operations in 1998. It is one of
India's leading cable multi-system operators with a pan-India presence. It
distributes cable TV on digital and analogue platforms, and provides broadband
services. Its cable services reaches 8.2m homes. It has a backend network of 71
analogue and 19 digital head-ends, and 15,000km of hybrid fibre-coaxial
network. The Rajan Raheja group holds a 50.6% stake in the company.
Statement of Risk
We believe the key risk for Hathway is poor execution. Other risks include:
intense competition from DTH, regulatory risks, and placement revenue could
decline to zero in case of complete digitisation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Hathway Cable & Datacom
M anagement meeting takeaways
Takeaways from meeting with Hathway CFO post 1QFY12 results
1) Hathway lowered its FY12 digital subs addition guidance from 800k to 500k
(UBS-e 415k) as it believes phase I of digitization deadline could get delayed by 1-
2 quarters. 2) Hathway has started offering higher bandwidth broadband plans (2 /
5 mbps) and has raised package prices, which led to ~Rs25 improvement in
broadband ARPU in 1Q. 3) Hathway believes cost cutting initiatives and higher
placement revenues (management estimates FY12 placement revenues to grow
15% vs. UBS-e 10%) will contribute to EBITDA growth in the next 2-3 quarters.
Maintain earnings estimates for FY12
Based on the recent quarterly disclosure, we calculate 1Q consolidated EBITDA to
be Rs407m (+9% yoy) – this is ahead of UBS-e Rs360m and consensus estimate of
Rs350m. We are 18-24% below consensus on FY12-13E EBITDA forecast. We
assume mandatory digitisation will get implemented in FY13.
Hathway benefits from cable digitisation
Hathway remains to be a long-term growth story and a play on cable digitisation in
India. We believe implementation of mandatory digitisation is imminent and would
benefit Hathway, given it has digital cable infrastructure in place and subs reach of
8.7m homes – 82% of which is a part of Phase I and Phase II implementation.
Valuation: Maintain Buy with PT of Rs130, execution key to re-rating
We value Hathway at 8.5x FY13E EV/EBITDA. We believe execution remains
key for Hathway’s stock price re-rating. We prefer Dish TV due to its better
execution and earnings visibility.
Hathway Cable & Datacom
Hathway Cable & Datacom (Hathway) began operations in 1998. It is one of
India's leading cable multi-system operators with a pan-India presence. It
distributes cable TV on digital and analogue platforms, and provides broadband
services. Its cable services reaches 8.2m homes. It has a backend network of 71
analogue and 19 digital head-ends, and 15,000km of hybrid fibre-coaxial
network. The Rajan Raheja group holds a 50.6% stake in the company.
Statement of Risk
We believe the key risk for Hathway is poor execution. Other risks include:
intense competition from DTH, regulatory risks, and placement revenue could
decline to zero in case of complete digitisation.
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