Dish TV - Robust numbers after long, to last!!! :: ICICI Securities

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Robust numbers after long, to last!!!
• Revenue growth of 16.5% YoY was led by ARPU expansion to | 177
vs. expectation of | 174 coupled with net subscriber addition of 0.42
million subscribers. This brought about a 19.0% YoY expansion in
subscription revenues to | 655.4 crore
• The EBITDA came in at | 191.2 crore vs. our expectation of | 165.3
crore, up 41.1% YoY. EBITDA margins came in at 26.8%, up 466 bps
YoY vs. our expectation of 23.9% mainly driven by higher-thanexpected
revenue growth & lower-than-expected programming costs
• The company reported a net loss of | 2.9 crore (vs. expectation of
| 11.6 crore loss) - despite higher-than-expected finance costs and
depreciation expenses - on the back of higher operating leverage
Share in net subscriber addition increasing……
Dish TV, the largest DTH operator with 11.4 million net subscribers, has
witnessed a slight revival in subscriber addition, with net adds of 1.1
million in 9MFY15 vs. total adds of 0.7 million in FY14. As per the
management commentary, Zing comprises as many as 17-18% of net
additions by the company. The company recently launched the
application in the market of Tamil Nadu and is a medium for the company
to capture market share into the Phase III and IV markets. The company
remains upbeat on subscriber additions in the coming fiscals. We expect
it to add 1.4 and 1.6 million subscribers in FY16E and FY17E, respectively,
to reach 15.9 million net subscribers.
Takes price hikes; ARPU expansion under way with shift to HD
Dish TV’s ARPU has expanded from | 153 in FY12 to | 163 in FY14 (like to
like basis). The company has taken 5-7% price hikes across its packages
that have already been affected in about 80% of its subscriber base. The
price hike coupled with a ramp up in HD subscribers led to an ARPU
expansion to | 177 from | 172 in the previous quarter. The company
intends to implement differential pricing across cities as a fillip to its
ARPU while the complete benefit of price hikes would also be visible in
the coming quarters. Since the addition would be mainly in Phase III and
IV markets, the blended ARPU is expected to grow at 4.3% CAGR (FY14-
17E) to | 186.
Content costs rationalisation…
Dish TV has entered into fixed fee deals with Star and Zee, which would
get renewed only in September 2016. This fixed fee deals will free the
company from volatility in content costs in the event of higher number of
sporting events, thus helping the company to control the growth in
content costs to the tune of 8.3% CAGR over FY14-17E to | 988.9 crore.
The increase in revenues and controlled costs would lead to an EBITDA
margin expansion to 27.8% in FY17E from 24.9% in FY14.
Upgrade to buy with target price of | 90
The robustness in subscriber additions coupled with robust growth in
ARPUs owing to the differential pricing adopted by the company and
ramp up in HD boxes indicate towards higher operating leverage. We
believe the company will report profits from the next quarter onwards
and value the company at | 90 per share using the DCF methodology.

LINK
http://content.icicidirect.com/mailimages/IDirect_DishTV_Q3FY15.pdf