SHARETIPSINFO >>Research Reports >>Dish Tv >> (25-07-2013)

Theme of Investment – ‘Digitization Play’

Q1FY13 Result expectation:

1. Revenue to increase 12% YoY and 5% QoQ to Rs 5, 800 cr.
2. Subscription revenue is likely to increase 4% QoQ to Rs 2,100 cr.
3. EBITDA margin is likely to expand 520bp QoQ to 26.8% largely due to lower content costs.
4. Net loss to decline by 8% QoQ to Rs 40 cr.
5. ARPU to be Rs 160

COMPANY OVERVIEW:
Dish TV India Limited is an Indian direct-to-home (DTH) service provider. Dish TV is a division of Zee Network Enterprise (Essel Group Venture). Zee Network incorporated Dishtv to modernize television (TV) viewing. It provides features such as Electronic Programme Guide (EPG), parental lock, games, 400+ channels and services,[4] interactive TV and movies on demand. Its primary competitors are cable television and other DTH service providers.

Competitors:

1. Airtel
2. Reliance Big
3. DD Direct
4. Tata Sky
5. Sun Direct
6. Videocon D2H

Subscriber Base:

The company added 0.2 million net subscribers in the March quarter, touching a total of 10.7 million net subscribers.

Management Take:

Fiscal 2013 saw most players in the Indian DTH industry evolve to the next level. Under Dish TV’s leadership, the industry pulled off a significant increase in the acquisition price over the last several months, thereby reducing the effective cash burn per subscriber.

The ARPU for the quarter at Rs 157 was down compared with Rs 160 in the immediately preceding quarter.

Recent Developments:

1. The company set up a 70:30 joint venture company Dish T V Lanka (Pvt) Ltd on 25 April 2012 under the laws of Sri Lanka with Satnet (Pvt Ltd). Satnet has a DTH licence and the joint venture will work on providing DTH related service in the island country.
2. Dishtv has selected the integrated systems-on-a-chip (SoCs) by Broadcom Corporation - semiconductor solutions provider for wired and wireless communications - to power its upcoming generation of satellite set-top boxes.
3. Dish TV is upping the cost of its standard definition digital set-top boxes. They now cost an extra $4.11, taking the price to $36.98, while the DVR version costs a couple of dollars extra at $38.62.   Dish is holding the price of its more expensive HD boxes at Rupees 3099 ($51.50).

INVESTMENT RATIONAL:

1. Phase-II digitization is likely to present an opportunity to digitize 11-12m households, of which the DTH industry could garner 35-40%.
2. EBITDA Margins likely to improve.
3. DTH technology is leading the digitization wave, with industry subscriber base of ~40m or one-third of the total cable and satellite base of ~120m.
4. DITV is well positioned to benefit from the ongoing digitization further boosted by government regulations to phase out analogue broadcasting, which should drive 19% revenue CAGR and 30% EBITDA CAGR over FY13-15.
5. Dish TV (DITV) enjoys a leadership position, with ~30% subscriber share in the fast-growing 6-player Indian DTH market.
6. As of December 2012, DITV had 10.5m active DTH subscribers.
7. Focus on value-focused subscribers and FCF, industry dynamics improving
8. Content cost rise in FY13 was at ~5.1% vs. management’s earlier guidance of 12-15%. Dish has guided for 8-10% y-y rise in FY14.

Risk:

1. Likely increase in competitive activity as six DTH operators and several MSOs might see digitization as an opportunity to grab subscribers.
2. Potential increase in content costs, as broadcasters look to enhance monetization post digitization.

TREND OF SHAREHOLDING PATTERN IN LAST 4 QUARTER:
 

FIIs have increased stake over a period of time.

FINANCIAL:
Financial are improving. Company is in the investment mode so it has not shown profit. We expect turnaround in this fiscal. Higher depreciation expenses are keeping the company in loss. If we look at the cash generation capacity, company is making the cash profit every year and is able to finance its expansion.

VALUATION &OUTLOOK:
We are positive on Dishtv as it is a good digitization play. The stock trades at an EV of 9.8x FY14E and 7x FY15E EBITDA. We value Dishtv at 9x FY15E EBITDA, the fair value come at 74.

CONCLUSION:
Investors with patience of 6-8 months could take exposure. The fair value is Rs 74. The downside risk remains low. Stock is trading near 52 week low.

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