Dish TV India DITV IN; DSTV.BO October 30, 2014

Transcription

1 Media India 2QF15 result review BUY Steady performance; maintain Buy Institutional Equity Research Dish TV India DITV IN; DSTV.BO October 3, 214 Current price (3 Oct) Rs 56 Target price Rs 7 Upside/(downside) % 25 Earning estimate Revised Market data Mkt capitalisation Rs bn 59.5 Average daily vol ' 12, week H/L Rs 64.8 / Shares O/S mn 165. Free float mn Promotor holding % 64.5 Foreign holding % 11.9 Face value Rs 1. Price performance (%) 1m 3m 6m 1yr Nifty (abs) Stock (abs) 3.7 (6.4) Relative to Index 1.1 (11.3) (3.2) (21.8) Performance (4) Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Dish TV (LHS) Source: Bloomberg, SSLe (%) 4 2 (2) Rel. to Nifty (RHS) Dish TV reported steady performance for 2QF15, with net subscriber addition of 378, maintaining the Q1 momentum. Revenue increased 4.9% QoQ to Rs6,724mn (SSLe of Rs6,415mn). Subscription revenue grew 4.8% QoQ to Rs6,168mn, driven by steady subscriber addition and better ARPU. The net subscriber base increased to 12.1 million at the end of the quarter. ARPU improved 1.2% QoQ to Rs172. Notwithstanding decline in content costs, EBITDA margins fell 4bps QoQ to 24.1% (SSLe of 24.9%) on the back of higher selling and distribution expenses. Net loss declined to Rs151mn vs. 161mn QoQ (SSLe of Rs125mn). We have introduced F17e building in 15.3% subscription revenue CAGR over F14 F17e. We maintain BUY, with target price of Rs7. Management expects to be closer to the top end of its F15e addition target: Dish TV reported another quarter of steady subscriber addition clocking net subscriber addition of 378,. According to the management, Dish TV s market share improved to 27% in Q2 (24.5% QoQ. Going forward, for F15e, the management expects to be closer to the upper end of its target net subscriber addition of million (.71 million in H1). The company continued to gain traction in its Zing offering, which constituted 18 2% of the incremental addition. The company has witnessed strong subscriber addition in October hinting at a strong Q3. Moreover, Q4 is expected to be strong due to the Cricket World Cup scheduled in the quarter. ARPU uptrend to continue: Only 25% of the subscriber base was captured in the quarter for rate hike implemented in August (mainly due to TRAI regulation of rate hike to be implemented only on recharge). Going forward, the management expects ARPU to improve, as a) the rate hike comes into effect for the entire subscriber base and b) through increase in HD subscriber base. HD offtake increased to 15 16% of addition, with revenue share of ~12%. Overall, the management expects ARPU to report a steady uptrend. Earnings call highlights: a) H1 capex was at ~Rs2.75bn and guided to be Rs5.75bn in F15e; b) gross debt stood at Rs13.75bn (Rupee debt of Rs4.35bn and US dollar denominated debt of US$155mn) ; c) management expects gross debt to reduce; d) the company generated FCF of Rs11mn (Rs21mn QoQ); e) Interest includes Rs18mn towards interest on license fee liability payable; f) Sri Lanka operations getting delayed on account of scheduled elections; g) STB inventory has.8 million boxes; and h) subscriber acquisition cost (SAC) declined to Rs165. Valuation: The stock currently trades at EV/EBITDA of 1.x/8.1x F15e/F16e EBITDA. Dish TV remains well positioned to garner a fair share of the DAS Phase III/IV roll out, backed by diverse offerings, improving cash flows and stronger balance sheet. We maintain BUY, with a target price of Rs7 valuing the company at EV/EBITDA of 1x F16e EBITDA. Dipesh Mehta dipesh.mehta@sbicapsec.com Neerav Dalal neerav.dalal@sbicapsec.com Financial summary Y/E Mar (Rs mn) F13 F14 F15e F16e F17e Sales 21,668 25,9 27,415 31,868 36,486 Growth YoY (%) EBIDTA margin (%) Net income (66) (1,576) (562) (24) 754 EPS (1.2) (.4) (.5) (.2).7 Growth YoY (%) NM NM NM NM NM P/E (x) NM NM NM NM 78.9 EV/EBIDTA (x) Dividend yield (%) RoE (%) NM NM NM NM NM RoCE (%) SBICAP Research on Bloomberg SBICAP <GO> Please refer to our disclaimer given at the last page.

2 Revenue driven by 12.2% YoY growth in subscription revenue Quarterly Financials Particulars (Rs mn) 2QF15 1QF15 QoQ (%) 2QF14 YoY (%) 2QF15e Var (%) Revenue 6,724 6, , , Operating Cost 2,79 2,727 2,567 2,758 Employee benefits exp Other Expenses 2,14 1,853 1,665 1,816 EBITDA 1,624 1, , , EBITDAM (%) Depreciation and amort. 1,519 1,453 1,54 1,476 EBIT (11.7) (14.6) EBITM (%) Other income Interest expenses Extraordinary/exceptional - - Profit before tax (151) (161) NM (85) NM (125) NM Tax expense ETR (%) PAT (151) (161) NM (85) NM (125) NM Minority Interest Reported net profit (151) (161) NM (85) NM (125) NM Non-recurring items Adjusted net profit (151) (161) NM (85) NM (125) NM NPM (%) (2.2) (2.5) (1.4) (2.) EPS (.1) (.2) NM (.1) NM (.1) NM We have marginally tweaked our F15e/F16e estimates to factor H1 performance Change in estimates (Rs mn) Revised Old Change (%) F15e F16e F15e F16e F15e F16e Net sales 27,415 31,868 26,665 3, EBITDA 6,727 7,996 6,574 7, EBITDA margin (%) (11) bps (1) bps Adj. PAT (562) (24) (81) 188 NM NM EPS (.5) (.2) (.8).2 NM NM Source: SSLe We have introduced F17e estimates building in subscription revenue CAGR of 15.3% over F14 F17e Key assumptions Y/E Mar F15e F16e F17e Closing net subscriber base (million) Net subscriber addition (million) ARPU Content cost (% of sales) Other operating costs (% of sales) Employee cost (% of sales) SG&A expenses (% of sales) EBITDA margin (%) ETR (%).. 1. Source: SSLe dipesh.mehta@sbicapsec.com I neerav.dalal@sbicapsec.com October 3, 214 2

3 Net subscriber base increases steadily Improvement in net subscriber addition (million) (million) Net subscriber base Net addition ARPU shows an uptick SAC showing steady decline ,4 1,8 2,21 1,996 1,828 1,849 1,889 1,8 1,8 1, , ARPU Subs. acq. Costs dipesh.mehta@sbicapsec.com I neerav.dalal@sbicapsec.com October 3, 214 3

4 1- year forward EV/EBITDA chart The stock currently trades at 1.x/8.1x F15e/F16e EV/EBITDA 6 3 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Price 5x 9x 13x 17x 21x We value the stock using 1x F16e EV/EBITDA (x) 18 9 Jan-9 Apr-9 Jul-9 Oct-9 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 EV/1 yr fwd EBITDA Mean +1 SD -1 SD +2 SD -2 SD Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Source: Bloomberg, SSLe dipesh.mehta@sbicapsec.com I neerav.dalal@sbicapsec.com October 3, 214 4

5 Financials Income statement Balance sheet Y/E Mar (Rs mn) F13 F14 F15e F16e F17e Y/E Mar (Rs mn) F13 F14 F15e F16e F17e Revenue 21,668 25,9 27,415 31,868 36,486 Cash & bank balance 3,645 3,426 4,178 3,93 4,57 growth (%) Other current assets 3,52 3,524 3,565 4,35 4,532 Operating expenses 15,874 18,849 2,688 23,872 27,257 Investments 2,782 2, 2,5 3,5 4,5 EBITDA 5,794 6,24 6,727 7,996 9,229 growth (%) Net fixed assets 2,89 17,721 18,879 18,69 19,847 Depreciation & amortisation 6,276 5,974 6,128 7,7 7,224 Goodwill and intangible assets EBIT (482) ,5 Other non-current assets ,137 2,567 2,968 Other income (net) Total assets 31,548 27,72 31,355 32,811 36,489 Interest expenses 1,284 1,328 1,682 1,817 1,958 Extraordinary/Exceptional (594) 1, Current liabilities 15,142 15,673 19,318 22,824 27,45 PBT (66) (1,576) (562) (24) 838 Borrowings 16,33 14,95 14,595 12,595 11,95 Tax Other non-current liabilities 1,632 1,6 1,13 1,32 1,522 Effective tax rate (%) Total liabilities 33,13 3,828 35,43 36,739 39,662 Profit after tax (66) (1,576) (562) (24) 754 Minority interest () Share capital 1,65 1,65 1,65 1,65 1,65 Reported Net profit (66) (1,576) (562) (24) 754 Reserves & surplus (2,621) (4,191) (4,753) (4,993) (4,239) Non-recurring items 594 (1,164) Shareholders' funds (1,556) (3,126) (3,688) (3,928) (3,174) Adjusted net profit (1,254) (412) (562) (24) 754 Minority interest growth (%) NM NM NM NM NM Total equity & liabilities 31,548 27,72 31,355 32,811 36,489 Financial ratios Cash flow statement Y/E Mar F13 F14 F15e F16e F17e Y/E Mar (Rs mn) F13 F14 F15e F16e F17e Profitability and return ratio (%) PBT (66) (1,576) (562) (24) 838 EBITDAM Depreciation & amortisation 6,388 5,974 6,128 7,7 7,224 EBITM (2.2) Chg in working capital 526 1,977 1,798 1,927 2,454 NPM (5.8) (1.6) (2.) (.8) 2.1 Total tax paid (82) (6) - - (84) RoE NM NM NM NM NM Other operating activities (78) 743 1,161 1,229 1,167 RoCE Operating CF 6,95 7,58 8,525 9,923 11,6 RoIC NM NM NM NM NM Capital expenditure (6,98) (2,986) (7,36) (6,837) (8,41) Per share data Chg in investments (1,241) 831 (5) (1,) (1,) O/s shares (mn) 1,65 1,65 1,65 1,65 1,65 Other investing activities 627 (485) EPS (1.2) (.4) (.5) (.2).7 Investing CF (7,595) (2,64) (7,285) (7,249) (8,61) FDEPS (1.2) (.4) (.5) (.2).7 FCF (886) 4,72 1,219 3,85 3,199 CEPS BV (1.5) (2.9) (3.5) (3.7) (3.) Equity raised/(repaid) DPS Debt raised/(repaid) 1,895 (3,988) 5 (2,) (1,5) Dividend (incl. tax) Valuation ratios (x) Other financing activities (691) (625) (989) (949) (886) PE NM NM NM NM 78.9 Financing CF 1,222 (4,61) (489) (2,949) (2,386) P/BV NM NM NM NM NM EV/EBITDA Inc/(dec) in cash & bank bal. (279) (192) 752 (275) 64 EV/Sales Closing cash & bank bal. 3,645 3,426 4,178 3,93 4,57 Other ratios D/E (x) NM NM NM NM NM DSO (days) Du Pont Analysis - RoE NPM (%) (5.8) (1.6) (2.) (.8) 2.1 Asset turnover (x) Equity Multiplier (x) (16.4) (8.9) (5.2) (4.2) (4.) RoE (%) NM NM NM NM NM dipesh.mehta@sbicapsec.com I neerav.dalal@sbicapsec.com October 3, 214 5

6 Recommendation History 9 8 BUY Stock Price HOLD SELL Target Price Date Stock Price TP Rec. 26-May BUY 7-Jul BUY 22-Jul BUY 8-Oct BUY 3-Oct BUY Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Source: Bloomberg, SSLe SBICAP Securities Limited Corporate Office: Mafatlal Chambers, A-Wing, 2nd Floor, N. M. Joshi Marg, Lower Parel, Mumbai Tel.: /1 Fax: sbicapresearch@sbicapsec.com KEY TO INVESTMENT RATINGS (w.e.f. February 213) Guide to the expected return over the next 12 months. 1=BUY (expected to give absolute returns of 15 or more percentage points); 2=HOLD (expected to give absolute returns between -1 to 15 percentage points); 3=SELL (expected to give absolute returns less then -1 percentage points) DISCLAIMER We, Dipesh Mehta, B.E. 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