30 July 2014

Dish TV - Estimates Revision - Healthy subscriber & ARPU growth expected :: Centrum

Rating: Buy; Target Price: Rs75; CMP: Rs59; Upside: 27.1%



Healthy subscriber & ARPU growth expected



We maintain BUY rating on Dish TV and believe the company is well
posititioned to take advantage of the 25% growth in the DTH industry
in FY15 with Dish TV’s incremental market share back on track at 24%.
Increasing traction in the Zing brand will help penetration in
Phase-III/IV markets with lower operating/marketing cost while focus
on HD subscribers in Phase-I markets coupled with further price hike
in August 2014 will help in steady ARPU increase. Marginal increase in
content cost will aid margin expansion as seen in Q1FY15 while
triggers such as implementation of GST and license fees on AGR basis
will benfit over the long term.

$ Q1FY15 result highlights: Dish TV posted 10.8% YoY growth in
revenues on the back of 11.5% YoY (7% QoQ) growth in subscription
revenues led by 1.8% YoY improvement in ARPU and 8.6% YoY growth in
net subscribers (332K addition). Operating profit grew by 29% YoY (up
21% QoQ) on the back of mere 5% increase in programming cost while A&P
declined by 58% YoY. Hence, operating margin was at 24.5%, 342bps
above expectations. Losses reduced to Rs161mn during the quarter
against Rs304mn in Q1FY14.

$ Healthy subscriber addition: The company increased its incremental
market share to 24% during the quarter with 332K net subscriber
additions. Focus on HD subscribers (13% of net adds) in Phase-I
markets and Zing brand’s availability in Odisha, West Bengal, Tripura,
parts of Assam and most parts of Maharashtra further aided subscriber
addition. Management expects the industry to grow by 25% this year
with opportunity of 40mn subscribers for DTH companies under
Phase-III/IV digitization. Hence the company has guided for 2-2.5mn
gross subscriber additions and 1.2-1.5mn net subscriber additions in
FY15.

$ Further price hike expected: The company has taken 5-7% price hike
in the middle and top level packs from June 2014 which partly helped
increase ARPU on a sequential basis. It further plans to increase
prices by 5% across packs including base packs from August 2014 with
full impact visible in Q3FY15. Management has also guided for a single
digit increase in content cost which would boost margins despite
contracts with Star and ZEEL coming up for renewal in July 2014.
Subscriber acquisition cost was flat on a sequential basis at Rs1800.
The company currently has gross debt of Rs13bn.

$ Valuations & Risks: We have increased our subscriber estimates for
FY15E/FY16E along with increasing operating margins on the back of
lower programming cost. We maintain BUY with a target price of Rs75
and value it at 9x June’16E EV/EBIDTA. We believe recent price hikes,
focus on HD subscribers in Phase-I markets, increasing traction in the
Zing brand along with future triggers with implementation of GST and
license fees on AGR basis will augur well for the company in the
medium to long term. Key risks could be delay in digitization and
increasing content cost.



Thanks & Regards

--
��
-->

No comments:

Post a Comment