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Dish TV India Ltd
RECOMMENDATION : ACCUMULATE
TARGET PRICE : RS.68 FY14E P/E: 28.6X
Dish TV is well placed to benefit from changing viewer preferences as
well as significant regulatory changes underway in the broadcasting
space. We forecast strong long-term earnings growth for the company,
and find the valuations attractive at CMP. Near-term, we believe implementation
of digitization, possible rise in foreign investment limits are potential
positive triggers. Industry issues, particularly relating with high churn,
are being tackled by the DTH industry, in our understanding. Digitization
and (consequent) possibility of sharp upward move in ARPUs shall overpower
expectedly unimpressive earnings performance in the next few
quarters. Irrational competiton during digitization remains the key risk.
We initiate with ACCUMULATE rating and price target of Rs.68.
Pure-Play on Changing Viewership Platform: Dish TV, leading the DTH
revolution in India, is a pure-play on changing viewership choices. The DTH industry
merges the masses from India's faraway villages (scale) with upscale
viewers demanding a high quality viewing experiences (channel choice,
HDTV, on-demand content). Dish TV, which has led voluntary digitization in
the country via DTH, is a pure-play on the necessity of cable and satellite TV
(rural areas) and demand for improved services (urban areas).
Rising Subscriber Base, Improving Economies: Dish TV's rising subscriber
base (now ~8% of India's C&S universe) has been the driver of revenues. Rising
clout in the Indian C&S space has also brought along economies in content
expenses as well as subscriber acquisition costs. We expect Dish TV to
continue adding subscribers at a robust pace over the next three years (3mn/
year), mandatory digitization being the incremental driver. Industry is pushing
for higher ARPUs, which, in addition to economies in S&D expenses, will help
margins. We foresee a 8.4 ppt rise in the company's margins over FY12-
FY16E.
Projections, Valuations Suggest Significant Upsides, Barring Irrational
Competition: We expect DTH industry to continue growing at 22% CAGR
over the next five years. Dish TV, the leader in the DTH space, is likely to
grow 23% CAGR in revenues and 33% CAGR in EBITDA over FY12E-FY14E.
We assess fair value of Dish TV stock at Rs 68/ share, while assuming competitive
intensity to be high, but not irrational.
Expect Digitization to Have a Positive Impact on DTH; ARPUs, Earnings
may see an unexpected growth: We believe digitization of Indian broadcasting,
approved by the parliament and kicking off in the metros from July,
2012, shall have a beneficial impact on Dish TV. Compression in LCOs margins
impact ARPU positively, which would either improve DTH ARPU (along
with revenues and margins), or reduce switching costs, enabling stronger subscriber
adds than current estimates. We believe sharply rising ARPUs in the
analogue space are a real possibility, and the likelihood of the event is a
prime reason why one should invest in Dish TV, in spite of weakening metrics
of the company.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Dish TV India Ltd
RECOMMENDATION : ACCUMULATE
TARGET PRICE : RS.68 FY14E P/E: 28.6X
Dish TV is well placed to benefit from changing viewer preferences as
well as significant regulatory changes underway in the broadcasting
space. We forecast strong long-term earnings growth for the company,
and find the valuations attractive at CMP. Near-term, we believe implementation
of digitization, possible rise in foreign investment limits are potential
positive triggers. Industry issues, particularly relating with high churn,
are being tackled by the DTH industry, in our understanding. Digitization
and (consequent) possibility of sharp upward move in ARPUs shall overpower
expectedly unimpressive earnings performance in the next few
quarters. Irrational competiton during digitization remains the key risk.
We initiate with ACCUMULATE rating and price target of Rs.68.
Pure-Play on Changing Viewership Platform: Dish TV, leading the DTH
revolution in India, is a pure-play on changing viewership choices. The DTH industry
merges the masses from India's faraway villages (scale) with upscale
viewers demanding a high quality viewing experiences (channel choice,
HDTV, on-demand content). Dish TV, which has led voluntary digitization in
the country via DTH, is a pure-play on the necessity of cable and satellite TV
(rural areas) and demand for improved services (urban areas).
Rising Subscriber Base, Improving Economies: Dish TV's rising subscriber
base (now ~8% of India's C&S universe) has been the driver of revenues. Rising
clout in the Indian C&S space has also brought along economies in content
expenses as well as subscriber acquisition costs. We expect Dish TV to
continue adding subscribers at a robust pace over the next three years (3mn/
year), mandatory digitization being the incremental driver. Industry is pushing
for higher ARPUs, which, in addition to economies in S&D expenses, will help
margins. We foresee a 8.4 ppt rise in the company's margins over FY12-
FY16E.
Projections, Valuations Suggest Significant Upsides, Barring Irrational
Competition: We expect DTH industry to continue growing at 22% CAGR
over the next five years. Dish TV, the leader in the DTH space, is likely to
grow 23% CAGR in revenues and 33% CAGR in EBITDA over FY12E-FY14E.
We assess fair value of Dish TV stock at Rs 68/ share, while assuming competitive
intensity to be high, but not irrational.
Expect Digitization to Have a Positive Impact on DTH; ARPUs, Earnings
may see an unexpected growth: We believe digitization of Indian broadcasting,
approved by the parliament and kicking off in the metros from July,
2012, shall have a beneficial impact on Dish TV. Compression in LCOs margins
impact ARPU positively, which would either improve DTH ARPU (along
with revenues and margins), or reduce switching costs, enabling stronger subscriber
adds than current estimates. We believe sharply rising ARPUs in the
analogue space are a real possibility, and the likelihood of the event is a
prime reason why one should invest in Dish TV, in spite of weakening metrics
of the company.
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