Dish TV - Guidance lowered - Centrum

Guidance lowered

Dish TV posted disappointing Q3FY12 results on the back of lower subscriber addition, high churn and flat ARPU along with higher cost. This led to lower sequential margins and high forex losses reducing profitability. We believe mandatory digitisation would help the company to add subscribers while the ARPU would grow marginally going forward. Maintain Buy.

Disappointing results: Dish TV reported 31.4% YoY (1.7% QoQ) growth in revenue to Rs4905mn while operating profit grew by 80% YoY (down 1.4% QoQ) to Rs1201mn. It reported a loss of Rs430mn against Rs478mn in Q3FY11. Lower subscriber addition, high churn, high commission expenses and Rs1156mn forex loss impacted the results.

Guidance lowered: Management has reduced its FY12 gross subscriber addition guidance from 3-3.5mn to 2.7mn on the back of reduced free viewing period and increased entry level price coupled with tough macro environment. In 9MFY12 the company added 2mn subscribers with 0.74mn in Q3FY12 itself. The company has also lowered its ARPU guidance from Rs160-165 to Rs155 on the back of lower package upgrades from subscribers, lower subscription of sports packages and high churn.

Weak operating matrix: Management maintained that the industry had a tough quarter on subscriber addition due to price hikes which impacted numbers while churn was high due to the economic slowdown. ARPU too remained flat during the quarter while it is expected to increase on the back of price hike in entry level packages. SAC reduced to Rs2124 following lower selling and distribution expenses. Content cost increased marginally to 33% of subscription revenues after the renewal of contract with Sony and Neo Sports during the quarter while Zee Network and Star Network contacts would come up for renewal next year. Lease rental too reduced by Rs100mn on a sequential basis as 5-year-old subscribers were not paying rentals and also because rentals have reduced from Rs2200 to Rs500 currently.

Estimates lowered; Maintain BUY: We have cut our FY12/FY13 estimates factoring in lower subscriber growth, higher churn, low rental revenues, higher than expected forex losses and higher commission. Hence we have cut our revenue/ebidta estimates by 3.8%/6.8% and 5.4%/6.3% for FY12 and FY13 respectively. However, we maintain BUY rating on the stock with a target price of Rs75 (12x FY13E Ev/Ebidta) and believe Dish TV would be one of the key beneficiaries of digitization.

Source : Equity Bulls

Keywords