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T o p l i n e i n l i n e ; f o r e x los s e s hit p r ofi t s …
Dish TV reported its Q2FY12 results, which were in line with our
expectations on the topline and EBITDA front. The topline stood at |
482.3 crore against our expectation of | 487.1 crore, growing 47.9% YoY
owing to higher number of subscribers and better ARPU. However, the
subscriber addition has been at 0.6 million subscribers this quarter,
disappointingly lower than expected. The subscriber base and ARPU
grew by 41.3% and 9.4% YoY, respectively. EBITDA for the quarter stood
at | 121.8 crore against our estimate of | 121.0 crore. EBITDA margin for
the quarter was 25.3%, 999 bps and 87 bps more than that of Q2FY11 and
Q1FY12, respectively, owing to the fixed nature of input costs. However,
on the PAT front, the company reported less than expected numbers on
account of forex losses of | 30.4 crore on foreign debt. The company
reported a loss of | 48.6 crore against | 45.2 crore in Q2FY11.
Highlights of the quarter
The subscriber addition for the quarter has slowed down to 0.6 million
from 0.7 million in Q1FY12 owing to the set top box price hike taken in
July and due to the macro environment causing consumers to cut down
on their discretionary spending. The ARPU increased from | 150 in
Q1FY12 to | 152 in Q2FY12. The subscriber acquisition cost increased
from | 2058 to | 2232 in Q2FY12 owing to | 15 crore of commission given
on 1.2 million set top boxes that were shipped but not completely
activated on account of building dealer inventory for the festive season in
October.
V a l u a t i o n
Aided by the festive season and mandatory digitisation, we expect
subscriber addition to pick up in the subsequent quarters. We expect Dish
TV to add 2.7 million and 3.1 million subscribers with an ARPU of | 154
and | 167 in FY12 and FY13, respectively. Assuming revenue CAGR of
19.4% over FY11E–FY20E and terminal growth of 4.5%, thereon, we have
arrived at a target price of | 86/share. The stock is currently trading at |
78. We are maintaining our BUY rating on the stock.
Outlook
The sunset date for analogue cable as per the ordinance passed by the
government for the metros is March 31, 2012. Dish TV is planning to go
aggressively in these metros in order to capture the HD consumers in
these urban regions. The company has launched a | 375 HD pack to lure
the customers who will be soon looking at a choice between DTH and
digital cable.
The DTH industry has advantages over digital cable as it is well
capitalised and all the equipment required are already in place along with
a superior distribution network. Digital cable, on the other hand, would
need to invest around | 10,000 crore for the equipment and another |
15,000 crore to give subsidies on the set top box to compete with the
DTH industry, which is already giving subsidy to the tune of | 1600 per
set top box.
The subscriber addition, for Dish TV, has slowed down in this quarter
owing to a price hike in set top boxes and an economic slowdown.
However, with the festive season lined up and the mandatory digitisation
ordinance passed by the government, we expect Dish TV to pick up on its
healthy subscriber addition. The churn rate, however, has been a cause
for concern. This has been high at a monthly 1.1% in last quarter. The
share in net adds for Dish TV has been a worry for the last two quarters. It
came down from 28.6% in Q4FY11 to 25.5% in Q1FY12 and further down
to ~24% in Q2FY12.
We expect addition of 12.3 million and 13.5 million subscribers for the
DTH industry and 2.7 million and 3.1 million subscribers for Dish TV for
FY12E and FY13E, respectively. Dish TV’s net paying subscriber base is
expected to increase to 10.0 million and 11.8 million by FY12 and FY13,
respectively. ARPU has shown an encouraging upward movement to |
152 in Q2FY12. Going forward, it is expected to pick up to | 154 and | 166
with exit ARPUs at | 158 and | 171 in FY12 and FY13, respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
T o p l i n e i n l i n e ; f o r e x los s e s hit p r ofi t s …
Dish TV reported its Q2FY12 results, which were in line with our
expectations on the topline and EBITDA front. The topline stood at |
482.3 crore against our expectation of | 487.1 crore, growing 47.9% YoY
owing to higher number of subscribers and better ARPU. However, the
subscriber addition has been at 0.6 million subscribers this quarter,
disappointingly lower than expected. The subscriber base and ARPU
grew by 41.3% and 9.4% YoY, respectively. EBITDA for the quarter stood
at | 121.8 crore against our estimate of | 121.0 crore. EBITDA margin for
the quarter was 25.3%, 999 bps and 87 bps more than that of Q2FY11 and
Q1FY12, respectively, owing to the fixed nature of input costs. However,
on the PAT front, the company reported less than expected numbers on
account of forex losses of | 30.4 crore on foreign debt. The company
reported a loss of | 48.6 crore against | 45.2 crore in Q2FY11.
Highlights of the quarter
The subscriber addition for the quarter has slowed down to 0.6 million
from 0.7 million in Q1FY12 owing to the set top box price hike taken in
July and due to the macro environment causing consumers to cut down
on their discretionary spending. The ARPU increased from | 150 in
Q1FY12 to | 152 in Q2FY12. The subscriber acquisition cost increased
from | 2058 to | 2232 in Q2FY12 owing to | 15 crore of commission given
on 1.2 million set top boxes that were shipped but not completely
activated on account of building dealer inventory for the festive season in
October.
V a l u a t i o n
Aided by the festive season and mandatory digitisation, we expect
subscriber addition to pick up in the subsequent quarters. We expect Dish
TV to add 2.7 million and 3.1 million subscribers with an ARPU of | 154
and | 167 in FY12 and FY13, respectively. Assuming revenue CAGR of
19.4% over FY11E–FY20E and terminal growth of 4.5%, thereon, we have
arrived at a target price of | 86/share. The stock is currently trading at |
78. We are maintaining our BUY rating on the stock.
Outlook
The sunset date for analogue cable as per the ordinance passed by the
government for the metros is March 31, 2012. Dish TV is planning to go
aggressively in these metros in order to capture the HD consumers in
these urban regions. The company has launched a | 375 HD pack to lure
the customers who will be soon looking at a choice between DTH and
digital cable.
The DTH industry has advantages over digital cable as it is well
capitalised and all the equipment required are already in place along with
a superior distribution network. Digital cable, on the other hand, would
need to invest around | 10,000 crore for the equipment and another |
15,000 crore to give subsidies on the set top box to compete with the
DTH industry, which is already giving subsidy to the tune of | 1600 per
set top box.
The subscriber addition, for Dish TV, has slowed down in this quarter
owing to a price hike in set top boxes and an economic slowdown.
However, with the festive season lined up and the mandatory digitisation
ordinance passed by the government, we expect Dish TV to pick up on its
healthy subscriber addition. The churn rate, however, has been a cause
for concern. This has been high at a monthly 1.1% in last quarter. The
share in net adds for Dish TV has been a worry for the last two quarters. It
came down from 28.6% in Q4FY11 to 25.5% in Q1FY12 and further down
to ~24% in Q2FY12.
We expect addition of 12.3 million and 13.5 million subscribers for the
DTH industry and 2.7 million and 3.1 million subscribers for Dish TV for
FY12E and FY13E, respectively. Dish TV’s net paying subscriber base is
expected to increase to 10.0 million and 11.8 million by FY12 and FY13,
respectively. ARPU has shown an encouraging upward movement to |
152 in Q2FY12. Going forward, it is expected to pick up to | 154 and | 166
with exit ARPUs at | 158 and | 171 in FY12 and FY13, respectively.
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