Buy stocks of Dish TV; target Rs 82

Dish TV :-

“Dish TV’s Q1FY13 result was in line with our expectation. The company reported net sales of Rs 520crs, a growth of 12% YoY driven by higher subscriber base and increase in ARPU. EBITDA stood at Rs 156crs, a robust growth of 27% YoY on account of higher revenue base and curtailed selling and distribution expenses. EBITDA margins jumped by 350bps over Q1FY12 to 29.9%. At net level, the company reported loss of Rs 32crs against loss of Rs 18crs over same period last year mainly because of increase in interest outgo and higher depreciation. Although digitization didn’t have any marginal impact on new subscriber addition in Q1FY13, the management is confident that new subscriber addition would happen in H2FY13E. With recent base pack hike, we expect increase in ARPU to continue. Strong revenue growth led by higher subscriber base, increase in ARPU and curtailed operating cost leave further room for margin improvement. With healthy free cash flow, we expect leverage ratios to improve in next 2 years.”

“The company reported 12% YoY net sales growth driven by 0.5mn new subscriber addition and 2% increase in ARPU. Gross subscriber base at the of the quarter stands at 13.6mn while net subscribers are 9.6mn. The management has guided new subscriber addition to continue and take a faster pace once digitization process progresses further. We believe the company will maintain in its numero Uno position in DTH market and will benefit the most from digitization. On ARPU front, 2%-3% ARPU growth can be seen for FY13E mainly on account of recent price hike taken in base price and incremental contribution from HD services.”

“Dish TV reported EBITDA margin improvement of 350bps YoY to 29.9% mainly on account of sustained SAC and lower ad spend in the quarter. With strong revenue growth, we expect further room for margin improvement for FY13E & FY14E; however increase in content cost due to renewal in programming contracts would be overhang in near term. Dish TV reported another strong quarter both on sales and EBITDA margins front. With ongoing digitization, we expect boost in new subscriber addition as the company is market leader and commands premium over its peers. Healthy growth in ARPU coupled with higher subscriber base support strong revenue growth. At current price, the stock is trading at 8.8x EV/EBITDA to its FY14E earnings. We recommend BUY with a target price of Rs 82,” says KRChoksey research report.