Please Share::
India Equity Research Reports, IPO and Stock NewsVisit http://indiaer.blogspot.com/ for complete details �� ��
Hathway Cable and Datacom Ltd.
Digitization to Unleash Growth
We expect mandatory digitization to substantially
increase the addressable market and spur earnings
growth. EV/EBITDA multiple of 6.1x (F13e) indicates
upside in view of our projected EBITA CAGR of 31%
over F11-13. Our PT of Rs138 suggests 19% upside.
Key Catalysts: (1) Progress on rollout of first phase of
digitization in 1HCY12. (2) Shake out of the LCO in
apprehension of digitization thus paving the way for further
increase in addressability, by mid CY12. (3) Perceptible
improvement in margin trend for Hathway likely to be seen in
quarterly results, by 2HCY12
Key Investor Debate: (1) Will mandatory digitization happen
– While the market seems to be skeptical we think it will
happen, even if with some delay. (2) Who wins – DTH or
cable? The market feels DTH industry will win the TV
distribution market and that the cable industry will lose. We
think both DTH as well as digital cable will show meaningful
increases in their returns and profitability while analog cable
will be the loser. (3) What happens to C&P fees after
digitization? The market’s perception is that it will drop close to
zero immediately after the first one or two phases of
digitization. We think it will take 6-7 years to fall to 10-12% of
its current levels.
Risks to our Call:
1) Consumer opposition results in a lack of progress on
implementation of digitization over the next 3-5 quarters.
2) Little success in getting a digital premium of Rs10-15/
month from consumers who opt for digitization: This
could happen if consumers resist paying for enhanced quality
and/or MSOs find it difficult to recover this amount from LCOs
amid lack of progress on digitization
3) DTH penetration runs ahead of our expectation,
mandatory digitization fails to take off and LCOs remain
recalcitrant. Our bear case encapsulates this scenario,
implying Hathway’s subscriber base would start shrinking but
margin enhancement would be elusive.
See full list -click link below:
No comments:
Post a Comment