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DishTV (DITV)
Media
Robust 2QFY12 impacted by one-time expenses. Dish TV reported optically weak
2QFY12 EBITDA of Rs1.22 bn (+9% qoq) and PAT loss of Rs486 mn led by (1) one-off
pre-booked distribution expenses of Rs140 mn and (2) forex loss of Rs304 mn (unhedged
ECB exposure); 2QFY12 results were ahead of expectations adjusted for these
one-offs. However, operating performance was subdued (reduced gross subs additions,
steady churn and ARPUs). Retain ADD led by structural growth dynamics (HD as well as
Mandatory Addressable Digitization); fine-tuned FY2013E TP to Rs95 (Rs100 previously)
on revised subs additions, ARPUs and Rs/US$ assumptions.
2QFY12 results analysis: Robust financials adjusted for one-off expenses
Dish TV reported optically weak 2QFY12 EBITDA of Rs1.22 bn (+9% qoq) as well as PAT loss of
Rs486 mn, both below expectations. However, the negative variance is on account of one-off
expenses (1) pre-booked festival season distribution expenses of Rs140 mn and (2) forex losses
of Rs304 mn on un-hedged ECB exposure. Adjusted for Rs140 mn expense, 2QFY12 EBITDA of
Rs1.36 bn would be ahead of our Rs1.3 bn expectation.
Thus, Dish TV adjusted EBITDA margin would be ~28%, ~400 bps increase over 1QFY12. We
have previously highlighted the negative impact of strong subscriber addition on EBITDA
margins in a particular quarter; conversely, reduced gross additions are positive for EBITDA
margins in a quarter and positive variance in 2QFY12.
Retain ADD: Led by structural growth dynamics (HD as well as MAD)
We retain our ADD rating on Dish TV with a revised FY2013E TP of Rs95 (Rs100 previously) led by
structural growth dynamics: (1) Dish TV retains a strong position in rural areas of India, with
potential 20 mn non-C&S TV HHs migrating to DTH. (2) Incremental value-addition also lies in
high-value urban subscribers, where DTH has had limited success so far; the value of a subscriber is
proportional to ARPU, assuming reasonable cost of migration. We expect Mandatory Addressable
Digitization to benefit DTH subscriber addition from urban areas (Exhibit 7). (3) This may be
supported by the availability of HD services on DTH (lack of HD services on cable). We view urban
subscriber migration to HD as inevitable, with MAD acting as the catalyst. All evidence points
towards potential inflection point for HD services: (a) demand (sale of HD-TV sets), (b) supply
(Exhibit 8; HD content) and (c) service (HD-DTH platforms). However, Dish TV needs to improve its
branding; wholesale pricing of HD channels (un-regulated) could be an issue.
We have fine-tuned our FY2012E-13E EBITDA estimates to Rs5.6 bn (Rs5.4 bn previously) and
Rs7.8 bn (Rs8.0 bn) led by (1) reduced subscriber addition (2.8 mn in FY2012E), (2) reduced ARPU
(FY2012E and beyond), (3) higher content cost (FY2013E) supported by (4) reduced advertising
spends (FY2012E-13E).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DishTV (DITV)
Media
Robust 2QFY12 impacted by one-time expenses. Dish TV reported optically weak
2QFY12 EBITDA of Rs1.22 bn (+9% qoq) and PAT loss of Rs486 mn led by (1) one-off
pre-booked distribution expenses of Rs140 mn and (2) forex loss of Rs304 mn (unhedged
ECB exposure); 2QFY12 results were ahead of expectations adjusted for these
one-offs. However, operating performance was subdued (reduced gross subs additions,
steady churn and ARPUs). Retain ADD led by structural growth dynamics (HD as well as
Mandatory Addressable Digitization); fine-tuned FY2013E TP to Rs95 (Rs100 previously)
on revised subs additions, ARPUs and Rs/US$ assumptions.
2QFY12 results analysis: Robust financials adjusted for one-off expenses
Dish TV reported optically weak 2QFY12 EBITDA of Rs1.22 bn (+9% qoq) as well as PAT loss of
Rs486 mn, both below expectations. However, the negative variance is on account of one-off
expenses (1) pre-booked festival season distribution expenses of Rs140 mn and (2) forex losses
of Rs304 mn on un-hedged ECB exposure. Adjusted for Rs140 mn expense, 2QFY12 EBITDA of
Rs1.36 bn would be ahead of our Rs1.3 bn expectation.
Thus, Dish TV adjusted EBITDA margin would be ~28%, ~400 bps increase over 1QFY12. We
have previously highlighted the negative impact of strong subscriber addition on EBITDA
margins in a particular quarter; conversely, reduced gross additions are positive for EBITDA
margins in a quarter and positive variance in 2QFY12.
Retain ADD: Led by structural growth dynamics (HD as well as MAD)
We retain our ADD rating on Dish TV with a revised FY2013E TP of Rs95 (Rs100 previously) led by
structural growth dynamics: (1) Dish TV retains a strong position in rural areas of India, with
potential 20 mn non-C&S TV HHs migrating to DTH. (2) Incremental value-addition also lies in
high-value urban subscribers, where DTH has had limited success so far; the value of a subscriber is
proportional to ARPU, assuming reasonable cost of migration. We expect Mandatory Addressable
Digitization to benefit DTH subscriber addition from urban areas (Exhibit 7). (3) This may be
supported by the availability of HD services on DTH (lack of HD services on cable). We view urban
subscriber migration to HD as inevitable, with MAD acting as the catalyst. All evidence points
towards potential inflection point for HD services: (a) demand (sale of HD-TV sets), (b) supply
(Exhibit 8; HD content) and (c) service (HD-DTH platforms). However, Dish TV needs to improve its
branding; wholesale pricing of HD channels (un-regulated) could be an issue.
We have fine-tuned our FY2012E-13E EBITDA estimates to Rs5.6 bn (Rs5.4 bn previously) and
Rs7.8 bn (Rs8.0 bn) led by (1) reduced subscriber addition (2.8 mn in FY2012E), (2) reduced ARPU
(FY2012E and beyond), (3) higher content cost (FY2013E) supported by (4) reduced advertising
spends (FY2012E-13E).
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