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Buy
Dish TV India (DSTV.BO)
Return Potential: 25% Equity Research
Upgrade to Buy; digitization makes risk/reward favorable
Source of opportunity
We upgrade Dish TV (Dish) to Buy from Neutral with a target price of Rs95,
(implying 25% upside from current levels) as we believe the company is well
placed to show a FY11-FY14E revenue/EBITDA CAGR of 30%/64% led by: 1)
steady net adds and ARPU uplift helped by the mandatory digitization, and 2)
improving EBITDA margin driven by operating leverage. We believe
consensus is not fully factoring in this turnaround and note that we are
7.7%/5.4% ahead of Bloomberg consensus for FY13/FY14. If the government
achieves its mandatory digitization target by FY14 (not our base-case), then
our implied value increases to Rs120, implying 58% upside.
Catalyst
We expect improving visibility on net profit/FCF breakeven and decent
uptake in the festive season (despite a muted economic growth) to act as
near-term catalysts. We estimate Dish to turn net profit positive in 3QFY12
and FCF positive in 1QFY13. In addition, faster-than-expected migration
from analog to digital platform and better-than-expected market share of
DTH/Dish could lead to upside risk to our estimates.
Valuation
Dish trades at 10.7X FY13E EV/EBITDA (vs. global peers 5.0X-8.2X), but
offers better growth (FY11-14E EBITDA CAGR of 64% vs. global peers at
5%-11%). The company trades at a 17% discount to historical 1-yr fwd
average EV/EBITDA of 19.8X. We raise our FY12E/13E/14E EBITDA by
4.5%/27.9%/37.3% to factor better subs/ARPU and operating leverage.
Accordingly our FY13E/ FY14E EPS increases to Rs1.17/Rs3.16 from
Rs0.22/Rs1.55 (FY12 EPS changes to -Rs0.18 from –Rs0.33). As a result our
12-m DCF based target price rises to Rs95 (prev. Rs46).
Key risks
INR depreciation; higher competition from cable operators.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Buy
Dish TV India (DSTV.BO)
Return Potential: 25% Equity Research
Upgrade to Buy; digitization makes risk/reward favorable
Source of opportunity
We upgrade Dish TV (Dish) to Buy from Neutral with a target price of Rs95,
(implying 25% upside from current levels) as we believe the company is well
placed to show a FY11-FY14E revenue/EBITDA CAGR of 30%/64% led by: 1)
steady net adds and ARPU uplift helped by the mandatory digitization, and 2)
improving EBITDA margin driven by operating leverage. We believe
consensus is not fully factoring in this turnaround and note that we are
7.7%/5.4% ahead of Bloomberg consensus for FY13/FY14. If the government
achieves its mandatory digitization target by FY14 (not our base-case), then
our implied value increases to Rs120, implying 58% upside.
Catalyst
We expect improving visibility on net profit/FCF breakeven and decent
uptake in the festive season (despite a muted economic growth) to act as
near-term catalysts. We estimate Dish to turn net profit positive in 3QFY12
and FCF positive in 1QFY13. In addition, faster-than-expected migration
from analog to digital platform and better-than-expected market share of
DTH/Dish could lead to upside risk to our estimates.
Valuation
Dish trades at 10.7X FY13E EV/EBITDA (vs. global peers 5.0X-8.2X), but
offers better growth (FY11-14E EBITDA CAGR of 64% vs. global peers at
5%-11%). The company trades at a 17% discount to historical 1-yr fwd
average EV/EBITDA of 19.8X. We raise our FY12E/13E/14E EBITDA by
4.5%/27.9%/37.3% to factor better subs/ARPU and operating leverage.
Accordingly our FY13E/ FY14E EPS increases to Rs1.17/Rs3.16 from
Rs0.22/Rs1.55 (FY12 EPS changes to -Rs0.18 from –Rs0.33). As a result our
12-m DCF based target price rises to Rs95 (prev. Rs46).
Key risks
INR depreciation; higher competition from cable operators.
INVESTMENT LIST MEMBERSHIP
Asia Pacific Buy List
Coverage View: Neutral
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