Accumulate Dish TV - Elara Capital

• Dish TV
• Rating : Accumulate
• Target Price : INR53
• Upside : 16%
• CMP : INR46 (as on 22 July 2010)

Core levers put up a strong show

Dish nets more subscribers with help of FIFA World Cup

Dish TV registered subscriber addition of 640,000 during Q1FY11, up 46% from last quarter, boosted largely by the FIFA World Cup in this period. The management expects to add a 2.5mn subscribers during FY11E, implying a subscriber base growth of 35% for the year.

Kicks off a pick-up in ARPU

ARPU for the quarter grew by 0.8% on QoQ basis to INR139, despite a high subscriber addition during the quarter. We note that blended ARPU growth is driven by growth in ARPU of Dish TV's old subscriber as the ARPU of new subscribers continues to be INR36-40. The management has guided for the ARPU to start picking up in Q3FY11E and reach INR152-155 by Q4FY11E.

Absence of one-off item masks strong core revenue growth

Dish TV's subscription revenues went up by 9.5% on a QoQ basis, driven by a subscriber base growth of 9.2% and an ARPU growth of 0.8% during the quarter. However, total revenues remained flat on a QoQ basis due to the absence of revenues related to HITS operations, which resulted in a revenue shortfall of INR210mn.

Benign competitive environment bodes well

In lieu of mild competition in DTH space and sports heavy FY11E, we have built in a 29% growth in the subscriber base and 3% growth in ARPU giving us INR2.1bn in EBITDA for FY11E. We expect a strong EBITDA growth in the coming quarters, helped by continuous ARPU improvement and low content cost growth.

Target price revised to INR53

Dish TV's share price continues to do well post our 'Buy' rating on the stock after the Q4FY10 results, delivering a 31% return since then. In light of the likely sturdy growth in coming quarters, we revise our DCF based target price to INR53, representing an upside of 16% from current levels. We rate the stock 'Accumulate'.

Source : Equity Bulls

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