Dish TV - 1QFY2014 Result Update - Motilal Oswal

Dish TV's 1QFY14 EBITDA declined 22% YoY but grew 1.4% QoQ to INR1.22b (v/s estimate of INR1.54b). EBITDA margin declined 890bp YoY and 60bp QoQ to 21%.

- Revenue grew 11% YoY and 4.1% QoQ to INR5.78b. Operating cost increased 4.9% QoQ and was 8.4% above our estimates on 1) higher-than-expected programming/content costs (impact of INR depreciation on dollar denominated programming costs and seasonal increase in sports content cost) and increased ad spends (up 85% QoQ leading to 230bp margin impact).

- Net loss for the quarter declined 30% QoQ to INR304m vs our estimate of INR402m, supported by lower depreciation and higher other income.

- Subscription revenue grew 15.9% YoY and 5.6% QoQ to INR5.28b driven by ~2% increase in net subscriber base to 10.9m and ~5% QoQ ARPU increase to INR165 on reported basis (3.5% increase on calculated basis). We note that apart from price hikes undertaken, the ARPU would have benefitted from one day higher in the quarter and sports package revenue.

- Net adds remained largely flat QoQ at ~0.2m. Monthly churn declined to 0.6% per month - lowest in three years (~0.2m subscribers churned during the quarter).

- Management has maintained its guidance of ~10% core content cost growth in FY14 although the other USD denominated component of programming/content costs might remain under upward pressure given INR weakness, in our view.

- We are downgrading EBITDA estimates by 14-18% led by lower margin assumptions post 1QFY14 operating cost surprise. We model FY14/15 net adds of 1/1.4m and FY13-15 ARPU CAGR of 6%. The stock trades at EV/EBITDA of 10.3x FY14E and 8.6x FY15E. Maintain Neutral with a revised DCF-based target price of INR57 (vs INR69 earlier).

Source : Equity Bulls

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