Dish TV - Standalone Q3 FY2013 Results - First Cut - Microsec

Dish TV India Ltd (Dish) announced its standalone Q3 FY2013 numbers on 22 January 2013. While the company's top line came in line with our as well as Bloomberg Consensus estimates, it reported losses, higher than street and our estimates, during the quarter.

We have provided normalized and reported numbers Dish's Q3 FY2013 results as the company's Q2 FY2013 net income included an exceptional gain of Rs.76.4 Crores. While Dish's top line increased 4.5% q-o-q to Rs.557.8 Crores, on normalized basis, its losses more than doubled, sequentially, to Rs.44.9 Crores in Q3 FY2013. Increase in top line was primarily driven by robust subscriber net adds and stable ARPU. While the company added 0.83 Mn new users its ARPU remained steady at Rs.160 per user during the quarter. However, the company reported a notable 447 basis points (bps) q-o-q contraction in EBIDTA margins, which remained key contributor to the negative bottom line despite growing revenues. Dish's management attributed the decline in margins to back loading of Content costs and additional expenses to capitalize on digitization opportunity. Barring these incremental expenses, which represented ~Rs.40 Crores of the total costs, the results would have been in line with our estimates.

Nevertheless, there were some more key positives, apart from healthy subscriber addition and stable ARPU, in the results. Dish reported a decline in Subscriber Acquisition Cost (SAC) to Rs.2,201 in Q3 FY2013 compared with Rs.2,273 Crores a quarter earlier. In addition, the company may continue to reap benefits of digitization push by the government. According to the company's management, Digitization, which could help Dish report improvement in ARPUs, may also lead to reduced churn, going forward. Moreover, Dish expects a limited increase of 7-8% in content costs during the upcoming financial year. The company also expect the subscriber growth to remain buoyant in FY2014E.

Although Dish reported below expected numbers in Q3 FY2013, we believe that the company may report improved performance in the upcoming quarters. Apart from specific one time hikes in costs, its management's dovish view supports our outlook. We continue to recommend Dish a BUY with a target price of Rs.96.80.

Source : Equity Bulls

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