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India Equity Research Reports, IPO and Stock News
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Key Takeaways
Subscriber additions slowing; may pick up in festive season
There is pressure on subscriber net additions, driven by macro slowdown leading to
postponement of purchases as well as likely fatigue post cricket World Cup/IPL.
DITV witnessed a decline in gross additions from 1.1m in 3QFY11 to 1m in 4QFY11
and further to 0.73m in 1QFY12. There could be further decline in 2QFY12.
However, additions are likely to pick up in the festive season; yearly addition could
be ~3m in FY12 (guidance of 3m-3.5m) v/s 3.5m in FY11.
Ramp-down in HD subscriber additions
While initial uptake of HD boxes was high, likely due to the pent-up demand and
cricket World Cup, the contribution to net additions from HD has declined to ~3%.
HD subscriptions could increase after Zee and Sony launch their HD channels.
Current population of HD boxes on an industry-wide basis is estimated at ~100,000.
ARPU trajectory unlikely to improve in near term
DITV reported an ARPU of INR150 in 1QFY12, flat QoQ. ARPU is unlikely to improve
in the near-term given weak usage trends.
Management maintains its guidance of ARPU increase to INR160-165 by 4QFY12
and would review the same during 3Q.
The company is taking steps to improve usage (on average, subscribers do not
recharge for ~5 days per month), which should improve ARPU.
However, price increases are unlikely in the near term.
Industry opportunity remains attractive; churn is a key concern area
DTH subscriber base should increase to ~60m v/s current base of 35m-40m.
Currently DITV, Airtel, and Videocon account for 25% each of the incremental
subscriber share.
Churn is a key concern area; average monthly churn for DITV increased from 0.7%
per month in 1HFY11 to 1.1% in 1QFY12.
High churn and delinquencies are key challenges to achieving growth targets.
Content costs: FY13 will set the bar
One fixed-fee contract will be coming up for renewal in FY12 while two significant
contracts will come up in FY13. Hence, there would be limited impact of contract
renegotiation this year. There were also certain one-off and event-related costs in
previous quarters, which are unlikely to repeat in coming quarters.
Valuation and view
The stock trades at EV/EBITDA of 16.1x FY12E and 10.3x FY13E consensus estimates.
Not Rated.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Key Takeaways
Subscriber additions slowing; may pick up in festive season
There is pressure on subscriber net additions, driven by macro slowdown leading to
postponement of purchases as well as likely fatigue post cricket World Cup/IPL.
DITV witnessed a decline in gross additions from 1.1m in 3QFY11 to 1m in 4QFY11
and further to 0.73m in 1QFY12. There could be further decline in 2QFY12.
However, additions are likely to pick up in the festive season; yearly addition could
be ~3m in FY12 (guidance of 3m-3.5m) v/s 3.5m in FY11.
Ramp-down in HD subscriber additions
While initial uptake of HD boxes was high, likely due to the pent-up demand and
cricket World Cup, the contribution to net additions from HD has declined to ~3%.
HD subscriptions could increase after Zee and Sony launch their HD channels.
Current population of HD boxes on an industry-wide basis is estimated at ~100,000.
ARPU trajectory unlikely to improve in near term
DITV reported an ARPU of INR150 in 1QFY12, flat QoQ. ARPU is unlikely to improve
in the near-term given weak usage trends.
Management maintains its guidance of ARPU increase to INR160-165 by 4QFY12
and would review the same during 3Q.
The company is taking steps to improve usage (on average, subscribers do not
recharge for ~5 days per month), which should improve ARPU.
However, price increases are unlikely in the near term.
Industry opportunity remains attractive; churn is a key concern area
DTH subscriber base should increase to ~60m v/s current base of 35m-40m.
Currently DITV, Airtel, and Videocon account for 25% each of the incremental
subscriber share.
Churn is a key concern area; average monthly churn for DITV increased from 0.7%
per month in 1HFY11 to 1.1% in 1QFY12.
High churn and delinquencies are key challenges to achieving growth targets.
Content costs: FY13 will set the bar
One fixed-fee contract will be coming up for renewal in FY12 while two significant
contracts will come up in FY13. Hence, there would be limited impact of contract
renegotiation this year. There were also certain one-off and event-related costs in
previous quarters, which are unlikely to repeat in coming quarters.
Valuation and view
The stock trades at EV/EBITDA of 16.1x FY12E and 10.3x FY13E consensus estimates.
Not Rated.
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