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Dish TV India
Growth hinges on festive season
Event
We re-assess our estimates for Dish TV for potential impact from slowing
GDP growth. We believe the company would be able to deliver strong subs
growth in FY12 albeit ARPU improvement would remain challenging. We have
retained our subs addition forecast but trimmed our ARPU forecast by 4%.
Our revised TP as we roll forward to FY13 is Rs95 (from Rs90 earlier). Street
has aggressively raised estimates on the name and we would use the
potential earnings downgrade cycle to build position.
Impact
DTH remains best poised TV distribution platform. In our thematic report,
Digitisation – The Golden Goose, 22 August 2011 we have argued that DTH
operators are best placed to monetize the attractive distribution opportunity in
the Indian media sector.
Festive season performance crucial for outperformance. 30% of our full
year subs addition target for Dish is expected to happen in 3Q FY12.
Consumer sentiment during the festive season will determine the pace of
subs addition, in our view. We maintain that the potential for positive surprise
is higher for subs addition vs. ARPU improvement.
FY12– another year of substantial subscriber growth. The Indian DTH
industry surprised us positively by adding 13m subscribers last year. Our
cable and satellite model expects another year of 13m gross additions, and
we expect Dish TV to repeat its FY11 performance by adding 3.5m gross
subs in FY12.
Rate hike done in May. Management has outlined its FY12 ARPU target of
Rs160–165. We were pleasantly surprised by the company’s execution in
FY11 on the ARPU front but are reining in our bullish thoughts and limiting our
ARPU est. to Rs149 for FY12 (exit quarter ARPU of Rs158). We are now
building in only 1% QoQ improvement in ARPU in 2Q and 3Q (vs. 3% earlier).
Earnings and target price revision
We would like to be conservative and cut our ARPU forecast by 4% to factor
in potential pressure from GDP slowdown. The impact of this on TP is partially
offset by roll forward of our valuation to March 2013.
Price catalyst
12-month price target: Rs95.00 based on a DCF methodology.
Catalyst: Sustained uptick in subscription ARPU for FY12.
Action and recommendation
Street downgrade could provide better entry point. We think Dish is best
suited to take advantage of changing consumer media habits. Even so, our
current FY13e EBITDA is 10% below consensus and we would build position
when the street downgrade cycle plays out.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dish TV India
Growth hinges on festive season
Event
We re-assess our estimates for Dish TV for potential impact from slowing
GDP growth. We believe the company would be able to deliver strong subs
growth in FY12 albeit ARPU improvement would remain challenging. We have
retained our subs addition forecast but trimmed our ARPU forecast by 4%.
Our revised TP as we roll forward to FY13 is Rs95 (from Rs90 earlier). Street
has aggressively raised estimates on the name and we would use the
potential earnings downgrade cycle to build position.
Impact
DTH remains best poised TV distribution platform. In our thematic report,
Digitisation – The Golden Goose, 22 August 2011 we have argued that DTH
operators are best placed to monetize the attractive distribution opportunity in
the Indian media sector.
Festive season performance crucial for outperformance. 30% of our full
year subs addition target for Dish is expected to happen in 3Q FY12.
Consumer sentiment during the festive season will determine the pace of
subs addition, in our view. We maintain that the potential for positive surprise
is higher for subs addition vs. ARPU improvement.
FY12– another year of substantial subscriber growth. The Indian DTH
industry surprised us positively by adding 13m subscribers last year. Our
cable and satellite model expects another year of 13m gross additions, and
we expect Dish TV to repeat its FY11 performance by adding 3.5m gross
subs in FY12.
Rate hike done in May. Management has outlined its FY12 ARPU target of
Rs160–165. We were pleasantly surprised by the company’s execution in
FY11 on the ARPU front but are reining in our bullish thoughts and limiting our
ARPU est. to Rs149 for FY12 (exit quarter ARPU of Rs158). We are now
building in only 1% QoQ improvement in ARPU in 2Q and 3Q (vs. 3% earlier).
Earnings and target price revision
We would like to be conservative and cut our ARPU forecast by 4% to factor
in potential pressure from GDP slowdown. The impact of this on TP is partially
offset by roll forward of our valuation to March 2013.
Price catalyst
12-month price target: Rs95.00 based on a DCF methodology.
Catalyst: Sustained uptick in subscription ARPU for FY12.
Action and recommendation
Street downgrade could provide better entry point. We think Dish is best
suited to take advantage of changing consumer media habits. Even so, our
current FY13e EBITDA is 10% below consensus and we would build position
when the street downgrade cycle plays out.
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