INSTITUTIONAL EQUITY RESEARCH
Dish TV India Ltd (DITV IN)
There is no reason to panic
INDIA | MEDIA | Company Update 25 February 2016
Over the last month, Dish TV’s stock price has underperformed broader indices on concerns BUY (Maintain) about stumbling ARPU growth and spike in content cost in FY17. Recent rupee weakness has CMP RS 70 also exacerbated worries. In this note, we have tried to address most of the concerns and TARGET RS 115 (+64%) quantify the financial impact on the company. ARPU growth lagging, but recent price hike should aid near‐term growth: Over the last COMPANY DATA three quarters, the company has hiked prices twice and implemented differential pricing in O/S SHARES (MN) : 1066 MARKET CAP (RSBN) : 77 phase‐1 and phase‐2 markets. Even then, the percolation to ARPU growth has been MARKET CAP (USDBN) : 1.1 disappointing due to – (1) increase in service tax to 14.5% from 12.36%, and (2) ARPU 52 ‐ WK HI/LO (RS) : 122 / 68 dilution from Zing’s subscriber additions (Zing contributes 22‐23% of Dish’s net adds, but its LIQUIDITY 3M (USDMN) : 6.7 base packs are 30‐60% cheaper). However, an approximate 4% price hike in August 2015 PAR VALUE (RS) : 1 across all packs should aid ARPU growth and higher proportion of HD subscriber addition SHARE HOLDING PATTERN, % (HD ARPU is more than twice SD ARPU) should negate ARPU dilution due to Zing’s Sep 15 Jun 15 Mar 15 subscribers. Upcoming sports‐heavy calendar would also aid ARPU growth in the current PROMOTERS : 64.5 64.5 64.5 year. We see ARPU CAGR of 4% in FY16‐18. FII / NRI : 20.2 22.8 13.1 FI / MF : 3.8 3.7 3.4 Increase in content cost in FY17 is not likely to surprise negatively: DishTV’s content cost NON PRO : 1.2 4.8 4.1 per subscriber looks low vs. industry peers because it has ~30% inactive subscribers in its PUBLIC & OTHERS : 10.6 8.2 7.0 reported net subscriber base. However, adjusted for this, its content costs are in line with peers. It has tied up content‐cost agreements with most broadcasters until H1CY16; PRICE PERFORMANCE, % 1MTH 3MTH 1YR contracts will come up for renegotiation only after that. Dish says an increase in content cost ABS ‐16.9 ‐29.6 ‐8.9 in FY17 should track its topline growth and should fall once new agreements are in place. In REL TO BSE ‐13.7 ‐21.4 10.6 the last five years, content cost CAGR was 16% – we expect it to be 17% in FY16‐18. PRICE VS. SENSEX Subscriber growth momentum to continue: DishTV missed net subscriber addition 280 estimates in Q3FY16 due to management changes and delays in promotional launches 240 (including its 99‐rupee Dish99 pack). Additionally, to augment its digitisation drive in phase‐ 200 3, it introduced a 360‐degree multi‐media campaign spanning media platforms. This DAS (Digital Addressable System) promotional campaign will enable it to capitalise on a huge 160 base that would switch to digital from analog. With Zing and the Dish99 pack, we expect it to 120 add 1.4/1.5/1.2mn net subscribers in FY16/17/18 (9MFY16 additions at ~1mn). 80 40 Rs 12bn+ OCF in FY17 to sustain subscriber adds momentum and repay debt: Driven by 0 improving operating margins and cash flow generation from WC changes, DishTV should Apr‐14 Oct‐14 Apr‐15 Oct‐15 generate Rs 12.0/14.6bn OCF in FY17/18. With set‐top box (STB) cost remaining stable, it Dish TV BSE Sensex can easily add ~4.5‐5.0mn subscribers per year, without raising incremental debt. We expect it to add 2.5mn subscribers (gross) in FY17/18, giving it the flexibility to pare its entire debt. Source: Phillip Capital India Research
KEY FINANCIALS Stock correction in line with broader indices, movement in consensus estimates stable: Rs mn FY16E FY17E FY18E Recent weakness in stock price can be attributed to a miss in reported KPIs in Q3FY16 result. Net Sales 30,597 35,192 40,722 But, over the last six months, consensus estimates (for both EBITDA and earnings) has EBIDTA 10,190 11,605 14,871 inched higher or remained stable, as the company reported robust operating profit growth Net Profit 2,560 4,410 6,013 driven by prudent cost management. Also, the stock is currently near the lower end of its EPS, Rs 2.4 4.1 5.6 trading range (1 standard deviation below its six‐year average on an EV/EBITDA basis). We PER, x 29.1 16.9 12.4 8.1 6.8 4.7 see room for a re‐rating over the next 2‐3 quarters based on increased momentum in EV/EBIDTA, x P/BV, x NM 19.4 7.6 subscriber addition and uptick in ARPU. ROE, % NM 114.9 61.1 Stock price not factoring in improved fundamentals: Over the past few years, Dish TV’s Debt/Equity (%) NM NM 10.2 margin and cash flow profile has improved significantly due to – (1) increased scale of Source: PhillipCapital India Research Est. operations, (2) decreased competitive intensity, and (3) prudent cost management. This Manoj Behera (+ 9122 6667 9973) growth momentum will continue with robust additions in its subscriber base and less than [email protected] inflationary increase in ARPU. FY16‐18 revenue/EBITDA CAGR should be 15%/21%. At CMP, the stock trades at an FCFE yield of 5%/8% on our FY17/18 estimates. We maintain our BUY rating with a March 2017 target price of Rs 115 (unchanged).
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DISH TV COMPANY UPDATE
ARPU growth lagging, but recent price hike to aid near‐term growth
ARPU growth has been lagging for the last few quarters: Over the last few quarters, ARPU growth has been sluggish (and missed consensus/our estimates) due to two factors: 1. Increase in service tax to 14.5% (including SBC – Swachh Bharat Cess) from 12.36% implemented from June 1st 2015 2. ARPU dilution from Zing’s subscriber additions (Zing contributes 22‐23% of Dish’s net adds, but its base packs are 30‐60% cheaper)
ARPU growth has slowed down over the last couple of quarters
182 ARPU*(in Rs) % change yoy (rhs) 12% 180 10% 178 176 8% Service tax and Zing contributed to a fall in ARPU growth 174 6% 172 170 4% 168 2% 166 164 0% Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16
*‐ based on old reporting standard Source: Company, PhillipCapital India Research
Pack comparison of Dish TV and Zing digital
Base pack price Discount to DishTV (RHS) 300 70%
250 60% 50% 200 Zing’s packs are at a steep discount to 40% Dish TV’s 150 30% 100 20%
50 10%
0 0% Dish TV Zing ‐ Odia Zing‐ Bangla Zing‐ Zing‐ Telugu Zing‐ Tamil Zing‐ Marathi Malayalam
Source: Company, PhillipCapital India Research
Recently hiked prices to support near‐term ARPU growth: The company has hiked prices by 4‐5% across all the packs in August 2015 to negate the impact of the increase in service tax. It has also implemented a differential pricing strategy across all Digital Addressable System‐2 cities (which constitute 42% of its existing subscriber base) since May 2015, which is yet to reflect in ARPU.
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DISH TV COMPANY UPDATE
Price movement of various Dish TV packs
600 Prior Aug‐14 Feb‐15 Aug‐15 Metros
500
400
300
200
100
0 New Super Family Pack Maxi Sports Pack All Sports Pack Platinum Sports Pack
Source: Company, PhillipCapital India Research
Many major sporting events lined up in CY16 – to aid higher HD subscriber adds: CY16 will see many major sporting events (T20 Cricket WC, Euro 2016, and Olympics) that should lead to an uptick in net HD subscriber addition and an increase in subscription of HD packs/sports pack by existing HD/SD subscribers.
Comparison of HD packs vs. SD packs
Base pack (Rs per month) 500
400
300
200
100
0 SD HD
Source: Company, PhillipCapital India Research
HD subscribers now contribute to 20.5% of DishTV’s net adds (during the 2015 cricket We see dishtv’s ARPU growth at 4‐5% world cup, this proportion had risen to 22%). In FY17, we estimate HD subscribers will over the next couple of years. constitute 22‐25% of its total net adds and negate the ARPU dilution impact of Zing/Dish99 subscribers – these two factors will support ARPU growth in the near term.
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DISH TV COMPANY UPDATE
ARPU growth expected to pick up from FY17 onwards
195 ARP(in Rs) % change yoy (rhs) 5%
190 4%
185 4% 3% 180 3% 175 2% 170 2% 165 1% 160 1% 155 0% FY16E FY17E FY18E FY19E
Source: PhillipCapital India Research
Content cost escalation unlikely to surprise negatively DishTV’s content cost has seen a CAGR of 16% over the last five years (FY10‐15) vs. subscription revenue growth of 25%; as a % of total revenue, it has declined to 29% in FY15 from 35% in FY10. DishTV says 50% of its content cost is on a fixed‐fee agreement basis (with an annual escalation clause) and the rest is on a cost‐per‐ subscriber basis (CPS).
Content cost linked to active subscriber base Content cost negotiation with broadcasters is based on its active subscriber base and not on its net subscriber base. As per the TRAI, the active subscriber base (of the DTH industry) is only 50% of the registered subscriber base – mainly due to the churn from DTH back to analog cable (mainly because of the cost difference). TRAI’s latest figures peg active subscribers in India at around 41mn.
Indian DTH industry: Registered vs. active subscribers
Registered subscribers Active subscribers active as % of registered subs 90 58% 80 56% 70 60 54% 50 52% 40 30 50% 20 48% 10 0 46% Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16
Source: TRAI
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DISH TV COMPANY UPDATE
Active subscriber market share FY13 FY14 H1FY15 FY15E* Videocon d2h 17% 19% 19% 20% Dish TV 21% 20% 20% 21% Active subscribers market share of Airtel Digital TV 20% 20% 20% 21% various DTH players as per various Tata Sky 23% 24% 24% 24% industry sources Reliance Digital TV 6% 5% 4% 4% Sun Direct 14% 12% 12% 11% Source: VideoconD2H Form 424B3 filing *‐ Our estimates
A rough calculation suggests that Dish TV should ideally report an ARPU of Rs 224 on a subscriber base of 14mn, but the actual ARPU it reported in Q3FY16 was 172 – this implies that there are ~ 30% non‐paying subscribers (which are active only for part of a year) in its system. Our interaction with various industry participants suggests that the inactive subscribers primarily belong to phase‐3 and phase‐4 markets (these subscribers have not churned out of the system – these subscribers typically use their STB for event‐specific short periods and revert back to analog for the rest of their consumption).
ARPU calculation based on 14mn active subscribers SD Zing‐ Odia/Bangla Zing ‐ Others HD Weighted Avg. Pack price 270 180 99 425 274 ST(@14.5% ) 39 26 14 62 40 Commission on recharges (@4%) 11 7 4 17 11 Total subscription revenue 220 147 81 346 224 No of subs(in mn) 12 0.1 0.5 1 14 ARPU 195 1 3 25 224 Source: PhillipCapital India Research
On a per subscriber (reported net) basis, Dish TV’s content cost has been Rs 54‐59 over the last five years. In the same period, content cost as a % of reported ARPUs declined to 31% in FY15 from 41% in FY11. Even on an adjusted active subscriber basis, content cost has stayed within Rs 77‐84.
Historical content cost on a per subscriber basis – adjusted active subs vs. reported net subs Content cost per adjusted sub per month (in Rs ) Content cost per sub per month (in Rs ) ARPU(in Rs ) ARPU(in Rs ) 200 50% 200 as a % of ARPU 70% as a % of ARPU 60% 40% 150 150 50% 30% 40% 100 100 30% 20%
20% 50 50 10% 10%
0 0% 0 0% FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15
Source: PhillipCapital India Research
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DISH TV COMPANY UPDATE
Content cost pay‐out in line with industry trend Overall content cost pay‐out for the other peers in the DTH industry (Tata Sky and VideoconD2H) is much higher than DishTV’s (see table below for FY15 numbers). Higher content cost pay‐out on an absolute basis for the peer group can be attributed to higher proportion of HD subscribers – Tata Sky ~20%, VideoconD2h ~10% vs. Dish TV’s <6%.
However, DishTV’s content costs on a per subscriber basis as a % of total ARPU are comparable to Tata Sky and 800bps higher than VideoconD2H’s. On a per‐subscriber basis (adjusted for inactive subscribers) DishTV’s costs are also comparable to VideoconD2H’s.
Content cost pay‐out for VideoconD2h, Tata Sky and Dish TV FY15 VideoconD2H Tata Sky Dish TV Content cost(in Rs mn) 8458 10468 8008 Average net subscriber(in mn) 9.31 8.45 12.1 Content cost per reported net subs(in Rs per month) 76 103 55 ARPU*(in Rs) 209 369 191 as a % of ARPU 36.2% 28.0% 28.8% *ARPU – Total revenue per subscriber (as we don’t have the break‐up of Tata Sky’s revenue) Source: VideoconD2H, Media Sources, PhillipCapital India Research
Content cost CAGR of 18‐20% from FY16‐18 DishTV’s content cost CAGR was 16% from FY10‐15. Normally, the content‐cost agreement with broadcasters is renewed every 2‐3 years and during renegotiations the cost generally rises 20‐30%.
Historical content cost movement for Dish TV
Content Cost (Rs mn) 9000 8000 19% increase 7000 21% increase 6000 33% increase 5000 4000 3000 2000 1000 0 FY10 FY11 FY12 FY13 FY14 FY15
Source: PhillipCapital India Research
Dish TV’s last content cost negotiations happened in FY15 and the next round is due mid‐FY17. Half of the content costs are linked to subscriber growth (cost per subscriber deal) and the remaining are on a fixed‐cost basis, with an annual escalation clause of 7‐8%. We expect these costs to increase 20% in FY17 and 15% in FY18 – in line with the industry trend.
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DISH TV COMPANY UPDATE
Estimated content cost increase for Dish TV
14000
12000
10000
8000
6000
4000
2000
0 FY15 FY16E FY17E FY18E FY19E
Source: PhillipCapital India Research
Subscriber growth momentum to continue DishTV missed net subscriber addition estimates in Q3FY16 due to management changes in the quarter and delay in the launch of its promotional campaign (including the Dish99 pack).
Dish TV Q3FY16 net adds missed estimates; were lower than Airtel and Videocon Net adds(in '000s) Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 DishTV 300 378 416 404 390 338 317 Airtel DTH 376 151 270 263 339 164 530 VideoconD2H 650 370 360 360 460 200 420 Source: PhillipCapital India Research
With mandatory digitisation of cable services by MIB (Ministry of Information and Broadcasting) in four phases, the target addressable market for the entire DTH industry continues to be immense. Phase‐1 and 2 markets have already been digitised with DTH holding ~40% market share. The next two phases of digitisation open up a huge market for the DTH industry – about 70mn analog cable TV households are up for grabs.
Target addressable market in phase‐3 and 4 markets (mn) DTH Digital Cable DD Free Dish Analog Total Phase I &II 15 17 3 35 Phase III 17 7 2 24 50 Phase IV 23 1 10 46 80 Source: VideoconD2H company ppt, PhillipCapital India Research
DTH players enjoy an inherent advantage over cable players in phase‐3 and 4 markets as most of the cable TV players are unorganised and lack the financial capability to seed set‐top boxes and provide backend infrastructure. Phase 1 and 2 entailed installing STBs in roughly 35mn homes in a relatively well‐defined and densely populated geographical area. For the cable industry, even covering this ground has stretched financial and operational resources, with very little clarity on the payback period for their investments – this indicates that phases 3 and 4 will probably pose greater logistical and financial challenges. So far it appears that DTH players have an upper hand in these markets and can see robust subscriber additions.
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DISH TV COMPANY UPDATE
Zing, DishTV’s localised service offering to benefit from structural benefit: For about 72% of the Indian cable TV market (geographically), Hindi is not a principal language. Regional GECs and movies enjoys ~27% viewership share cable TV homes. Hence, a differentiated service offering based on language preferences (where a user can directly choose to get a set‐top box to watch local channels instead of waiting for the local cable operator to install a set‐top box) can provide a strategic boost to customer additions for DishTV.
Currently, Zing has been launched in six regional markets – Odisha, West Bengal, Zing Digital is dishtv’s subsidiary Maharashtra, Tamil Nadu, Kerala, and Andhra Pradesh – which constitutes 62% of all (launched in January 2015), which India cable TV homes. Most TV households in these markets are analog and provides access to regional channel therefore, are targets for digitisation during the implementation of Digital packs at an affordable cost. Addressable System in phase 3 and 4.
Cable TV homes (% of all India cable TV homes)
Andhra Pradesh 15 Assam 1 Bihar 3 Delhi 5 Gujarat 6 Haryana 3 Karnataka 9 Kerala 4 Maharashtra & Goa 13 MP & Chhattisgarh 6 Orissa 1 Punjab & HP 3 Rajasthan 3 Tamil Nadu 14 UP & Uttrakhand 6 West Bengal 8 Source: TRAI Cell highlighted indicates Zing’s current target market
Viewership share (2014)
9.4% 17.9% Regional GECs 11.8% Regional News, Movies & Music
Hindi GECs 2.4% 9.2% 1.0% Hindi News & Movies
English Entertainment & News
17.3% Sports
Music, Kids & Infotainment 31.2% Other
Source: FICCI KPMG report 2014
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DISH TV COMPANY UPDATE
Launch of Dish99 pack to address the low ARPU customers in HSM In a bid to cater to the specific needs of a price‐sensitive audience, DishTV launched a unique plan – Dish99 – where a user can get access to 125 channels and services in digital quality and top it up with a choice of custom‐made 17 entertainment add‐on packs ranging from Rs 25 to Rs 75 and five regional add‐ons for Rs 10 each.
To augment its digitisation drive in phase‐3 (along with Dish99), the company has also introduced a 360‐degree multi‐media campaign spanning media platforms. This Digital Addressable System promotional campaign will enable Dish TV to capitalize the huge user base that would have to switch from analog cable to the digital platform.
Estimated net subscriber addition for Dish TV Based on Zing and Dish99, the company FY13 FY14 FY15 FY16E FY17E FY18E is likely to add 1.4/1.5/1.2mn net Net adds(in '000s) 1.4 1.5 1.2 1.1 1 1 subscribers in FY16/17/18. Source: PhillipCapital India Research
Stock corrected in line with indices, consensus estimates stable Dish TV’s stock price corrected by ~30% over the last three months due (1) miss in reported KPIs in Q3FY16 results, (2) weakness in market sentiment. But, during the same time frame, our and consensus estimates (EBITDA and earnings) continued to inch higher or remain stable, as the company reported robust operating profit growth driven by prudent cost management. Hence, we believe that recent weakness in stock price is unnecessarily overblown, and that DishTV’s fundamentals continue to be robust.
Consensus FY16/17/18 movement over the last six months – EPS (in Rs) and EBITDA (in Rs mn) EPS ‐ 2017 EPS‐ 2018 EPS‐ 2106 Price(RHS) Price(RHS) EBITDA ‐ 2017 EBITDA‐ 2018 EBITDA‐ 2106 5.50 130 15000 130
5.00 120 120 14000 4.50 110 110 4.00 100 13000 100 3.50 90 12000 90 3.00 80 11000 80 2.50 70 70 2.00 60 10000 60 1.50 50 9000 50 1.00 40 8000 40
Source: Bloomberg, PhillipCapital India Research
After a 30% correction in the past three months, the stock is near the lower end of its trading range (1 standard deviation below its six‐year average on an EV/EBITDA basis). We see room for a re‐rating over the next 2‐3 quarters, based on increased momentum in subscriber addition and uptick in ARPU.
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DISH TV COMPANY UPDATE
12m fwd EV/EBITDA: Now trading at 1 std. dev below its six‐year average 30
25
20 +1 Std dev
15 Average
10 ‐1 Std dev 5
0 10 10 10 11 11 11 12 12 12 13 13 13 14 10 14 14 15 11 15 15 16 12 13 14 15 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Jul Jul Jul Jul Jul Jan Jan Jan Jan Jan Jan Jan Oct Oct Oct Oct Oct Oct Apr Apr Apr Apr Apr Apr Source: PhillipCapital India Research
Robust cash flow/growth not reflected in current valuation Over the past few years Dish TV’s margins and cash flow has improved significantly due to (1) increased scale of operations, (2) decreased competitive intensity, and (3) prudent cost management. We expect growth momentum to continue with robust subscriber additions and less‐than‐inflationary increase in ARPU.
Rs 10bn+ OCF in FY17 to sustain subscriber adds momentum and repay debt: Driven by improving operating margins and cash flow generation from WC changes, DishTV We peg revenue/EBITDA CAGR over should generate Rs 12.0/14.6bn OCF in FY17/18. With STB cost remaining stable, it FY16‐18 at 15%/21% can easily add ~4.5‐5.0mn subscriber per year, without raising incremental debt. We expect it to add 2.5mn subscribers (gross) in FY17/18, giving it the flexibility to pare its entire debt.
Break‐up of estimated operating cash flow (Rs mn) FY16E FY17E FY18E Profit/(loss) before taxes 2560 4410 7074 Depreciation & Amortization 5879 6061 6941 Other adjustments 1750 1134 856 Op CF ex Wcap 10190 11605 14871 Wcap changes 542 711 822 Direct taxes paid 0 0 ‐1061 Cashflow from operations 10732 12316 14632 Source: PhillipCapital India Research
Improving operating performance key to rerating: We expect DishTV to continue displaying improved operating performance because of higher subscriber addition and return of pricing power. We value the company on a DCF basis using a WACC of 14.4% and terminal growth rate of 5% and arrive at a March 2017 PT of Rs 115, implying an upside of 64% from the current level. At our target price, the stock will trade at 13x/11x FY17/18 EV/EBITDA.
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DISH TV COMPANY UPDATE
Below we outline the derivation of our DCF valuation Rs mn FY16E FY17E FY18E FY19E FY20E FY21E FY22E FY23E EBIT 4,311 5,544 7,930 10,702 13,555 16,896 20,163 23,832 Tax ‐ ‐ (1,189) (2,140) (3,389) (4,224) (5,041) (5,958) D&A 5,879 6,061 6,941 7,390 7,811 8,152 8,547 9,000 Wcap changes 542 711 822 943 1,069 1,206 1,351 1,507 Capex (6,788) (7,536) (7,842) (8,182) (8,546) (9,231) (9,819) (10,452) FCFF 3,944 4,779 6,662 8,712 10,501 12,799 15,201 17,929 Disc Factor 1.0 1.0 1.1 1.3 1.5 1.7 2.0 2.2 PV of FCF 3,944 4,779 5,825 6,660 7,019 7,479 7,766 8,009
WACC calculation Risk free rate 8.0% Risk premium 6.0% Beta 1.3 Cost of equity 15.5% Post tax Cost of debt 11.0% D/E ratio 0.25 WACC 14.4% Terminal growth rate 5.0%
Valuation date 3‐31‐17 PV of CF 47,537 FCFF in terminal year 17,929 TV of CF 89,701 Implied exit FCFF multiple (x) 11.2 At CMP, the stock trades at FCFE yields FCFF 1,37,239 of 5%/8% on our FY17/18 estimates. Implied exit EV/EBITDA(x) 6.1 Net debt 15,214 FCFE 1,22,025 O/s shares 1,065 Value per share (Mar‐17) 115 Upside/downside 64% Source: PhillipCapital India Research
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DISH TV COMPANY UPDATE
Financials
Income Statement Cash Flow Y/E Mar, Rs mn FY15 FY16e FY17e FY18e Y/E Mar, Rs mn FY15 FY16e FY17e FY17e Net sales 27,816 30,597 35,192 40,722 Pre‐tax profit 74 2,560 4,410 7,074 Growth, % 20 10 15 16 Depreciation 6,138 5,879 6,061 6,941 Total income 27,816 30,597 35,192 40,722 Chg in working capital 1,338 542 711 1,874 Raw material expenses ‐57 0 0 0 Total tax paid & others ‐42 0 0 ‐1,061 Employee expenses ‐69 ‐73 ‐77 ‐80 Cash flow from operating activities 7,507 8,981 11,182 14,828 Other Operating expenses ‐20,359 ‐20,335 ‐23,511 ‐25,770 Capital expenditure ‐7,852 ‐6,788 ‐7,536 ‐7,842 EBITDA (Core) 7,331 10,190 11,605 14,871 Chg in marketable securities 500 0 0 0 Growth, % 62.5 39.0 13.9 28.1 Cash flow from investing activities ‐7,352 ‐6,788 ‐7,536 ‐7,842 Margin, % 26.4 33.3 33.0 36.5 Free cash flow 155 2,193 3,645 6,987 Depreciation ‐6,138 ‐5,879 ‐6,061 ‐6,941 Equity raised/(repaid) 1 0 0 0 EBIT 1,193 4,311 5,544 7,930 Debt raised/(repaid) 744 ‐5,539 ‐1,000 ‐1,000 Growth, % (181.6) 261.4 28.6 43.0 Cash flow from financing activities 744 ‐5,539 ‐1,000 ‐1,000 Margin, % 4.3 14.1 15.8 19.5 Net chg in cash 900 ‐3,345 2,645 5,987 Interest paid ‐1,754 ‐2,073 ‐1,800 ‐1,638 Other Non‐Operating Income 635 322 666 783 Pre‐tax profit 74 2,560 4,410 7,074 Valuation Ratios Tax provided ‐42 0 0 ‐1,061 FY15 FY16e FY17e FY18e Profit after tax 31 2,560 4,410 6,013 Per Share data Net Profit 31 2,560 4,410 6,013 EPS (INR) 0.0 2.4 4.1 5.6 Growth, % (101.3) 8,054.1 72.2 36.4 Growth, % NM NM 72.2 36.4 Net Profit (adjusted) 31 2,560 4,410 6,013 Book NAV/share (INR) (2.9) (0.5) 3.6 9.2 Unadj. shares (m) 1,066 1,066 1,066 1,066 CEPS (INR) 5.8 7.9 9.8 12.2 Wtd avg shares (m) 1,066 1,066 1,066 1,066 CFPS (INR) 7.0 8.1 9.9 15.5 Return ratios Return on assets (%) 3.9 12.7 17.2 19.1 Balance Sheet Return on equity (%) NM NM 114.9 61.1 Y/E Mar, Rs mn FY15 FY16e FY17e FY18e Return on capital employed (%) 81.2 (641.9) 142.9 67.8 Cash & bank 4,286 941 3,586 6,021 Turnover ratios Marketable securities at cost 0 0 0 0 Asset turnover (x) 6.2 6.7 6.8 10.7 Debtors 637 700 806 932 Sales/Total assets (x) 0.9 1.0 1.1 1.1 Inventory 99 84 96 112 Sales/Net FA (x) 1.5 1.5 1.7 1.8 Loans & advances 3,909 4,300 4,946 5,723 Working capital/Sales (x) (1.1) (0.7) (0.6) (0.5) Other current assets 216 237 273 316 Working capital days (389.6) (270.7) (232.3) (185.8) Total current assets 9,147 6,262 9,707 13,104 Liquidity ratios Gross fixed assets 48,160 55,448 63,484 71,326 Current ratio (x) 0.3 0.2 0.3 0.5 Less: Depreciation ‐33,621 ‐40,000 ‐46,561 ‐53,502 Quick ratio (x) 0.3 0.2 0.3 0.5 Add: Capital WIP 4,972 4,972 4,972 4,972 Interest cover (x) 0.7 2.1 3.1 4.8 Net fixed assets 19,510 20,419 21,895 22,795 Total debt/Equity (%) NM NM 216.4 48.7 Total assets 31,663 29,687 34,607 42,456 Net debt/Equity (%) NM NM 122.9 (12.4) Current liabilities 34,548 28,012 28,523 27,807 Valuation Total current liabilities 34,548 28,012 28,523 27,807 PER (x) 2,375.5 29.1 16.9 12.4 Non‐current liabilities 248 2,248 2,248 4,800 Price/Book (x) NM NM 19.4 7.6 Total liabilities 34,796 30,261 30,771 32,607 EV/Net sales (x) 3.1 2.7 2.3 1.8 Reserves & surplus ‐3,134 ‐573 3,836 9,849 EV/EBITDA (x) 11.6 8.1 6.8 4.9 Shareholders’ equity ‐3,134 ‐573 3,836 9,849 EV/EBIT (x) 71.4 19.2 14.3 9.3 Total equity & liabilities 31,663 29,687 34,607 42,456 Source: Company, PhillipCapital India Research Estimates
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DISH TV COMPANY UPDATE
Stock Price, Price Target and Rating History 130
120 B (TP 127) B (TP 127) 110 B (TP 118) 100
90 B (TP 102) B (TP 115) 80 B (TPB 80) (TP 80) 70 B (TP 67) B (TP 67) 60 B (TP 64) B (TP 64) B (TP 60) 50
40
30 F‐13 M‐13M‐13 J‐13 A‐13 S‐13 N‐13 D‐13 F‐14 M‐14M‐14 J‐14 A‐14 S‐14 N‐14 D‐14 F‐15 M‐15M‐15 J‐15 A‐15 S‐15 N‐15 D‐15 F‐16
Rating Methodology We rate stock on absolute return basis. Our target price for the stocks has an investment horizon of one year.
Rating Criteria Definition BUY >= +15% Target price is equal to or more than 15% of current market price NEUTRAL ‐15% > to < +15% Target price is less than +15% but more than ‐15% SELL <= ‐15% Target price is less than or equal to ‐15%.
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DISH TV COMPANY UPDATE
Management Vineet Bhatnagar (Managing Director) (91 22) 2483 1919 Kinshuk Bharti Tiwari (Head – Institutional Equity) (91 22) 6667 9946 Jignesh Shah (Head – Equity Derivatives) (91 22) 6667 9735 Research Automobiles Infrastructure & IT Services Strategy Dhawal Doshi (9122) 6667 9769 Vibhor Singhal (9122) 6667 9949 Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Nitesh Sharma, CFA (9122) 6667 9965 Logistics, Transportation & Midcap Anindya Bhowmik (9122) 6667 9764 Agri Inputs Vikram Suryavanshi (9122) 6667 9951 Telecom Gauri Anand (9122) 6667 9943 Media Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Banking, NBFCs Manoj Behera (9122) 6667 9973 Manoj Behera (9122) 6667 9973 Manish Agarwalla (9122) 6667 9962 Metals Technicals Pradeep Agrawal (9122) 6667 9953 Dhawal Doshi (9122) 6667 9769 Subodh Gupta, CMT (9122) 6667 9762 Paresh Jain (9122) 6667 9948 Yash Doshi (9122) 6667 9987 Production Manager Consumer Midcap Ganesh Deorukhkar (9122) 6667 9966 Naveen Kulkarni, CFA, FRM (9122) 6667 9947 Amol Rao (9122) 6667 9952 Editor Jubil Jain (9122) 6667 9766 Oil & Gas Roshan Sony 98199 72726 Cement Sabri Hazarika (9122) 6667 9756 Sr. Manager – Equities Support Vaibhav Agarwal (9122) 6667 9967 Pharma & Speciality Chem Rosie Ferns (9122) 6667 9971 Economics Surya Patra (9122) 6667 9768 Anjali Verma (9122) 6667 9969 Mehul Sheth (9122) 6667 9996 Engineering, Capital Goods Mid‐Caps & Database Manager Jonas Bhutta (9122) 6667 9759 Deepak Agarwal (9122) 6667 9944 Hrishikesh Bhagat (9122) 6667 9986 Sales & Distribution Corporate Communications Ashvin Patil (9122) 6667 9991 Sales Trader Zarine Damania (9122) 6667 9976 Shubhangi Agrawal (9122) 6667 9964 Dilesh Doshi (9122) 6667 9747 Kishor Binwal (9122) 6667 9989 Suniil Pandit (9122) 6667 9745 Bhavin Shah (9122) 6667 9974 Execution Ashka Mehta Gulati (9122) 6667 9934 Mayur Shah (9122) 6667 9945
Contact Information (Regional Member Companies)
SINGAPORE: Phillip Securities Pte Ltd MALAYSIA: Phillip Capital Management Sdn Bhd HONG KONG: Phillip Securities (HK) Ltd 250 North Bridge Road, #06‐00 Raffles City Tower, B‐3‐6 Block B Level 3, Megan Avenue II, 11/F United Centre 95 Queensway Hong Kong Singapore 179101 No. 12, Jalan Yap Kwan Seng, 50450 Kuala Lumpur Tel (852) 2277 6600 Fax: (852) 2868 5307 Tel : (65) 6533 6001 Fax: (65) 6535 3834 Tel (60) 3 2162 8841 Fax (60) 3 2166 5099 www.phillip.com.hk
www.phillip.com.sg www.poems.com.my
JAPAN: Phillip Securities Japan, Ltd INDONESIA: PT Phillip Securities Indonesia CHINA: Phillip Financial Advisory (Shanghai) Co. Ltd. 4‐2 Nihonbashi Kabutocho, Chuo‐ku ANZ Tower Level 23B, Jl Jend Sudirman Kav 33A, No 550 Yan An East Road, Ocean Tower Unit 2318 Tokyo 103‐0026 Jakarta 10220, Indonesia Shanghai 200 001 Tel: (81) 3 3666 2101 Fax: (81) 3 3664 0141 Tel (62) 21 5790 0800 Fax: (62) 21 5790 0809 Tel (86) 21 5169 9200 Fax: (86) 21 6351 2940
www.phillip.co.jp www.phillip.co.id www.phillip.com.cn
THAILAND: Phillip Securities (Thailand) Public Co. Ltd. FRANCE: King & Shaxson Capital Ltd. UNITED KINGDOM: King & Shaxson Ltd. 15th Floor, Vorawat Building, 849 Silom Road, 3rd Floor, 35 Rue de la Bienfaisance 6th Floor, Candlewick House, 120 Cannon Street Silom, Bangrak, Bangkok 10500 Thailand 75008 Paris France London, EC4N 6AS Tel (66) 2 2268 0999 Fax: (66) 2 2268 0921 Tel (33) 1 4563 3100 Fax : (33) 1 4563 6017 Tel (44) 20 7929 5300 Fax: (44) 20 7283 6835
www.phillip.co.th www.kingandshaxson.com www.kingandshaxson.com
UNITED STATES: Phillip Futures Inc. AUSTRALIA: PhillipCapital Australia SRI LANKA: Asha Phillip Securities Limited 141 W Jackson Blvd Ste 3050 Level 37, 530 Collins Street Level 4, Millennium House, 46/58 Navam Mawatha, The Chicago Board of Trade Building Melbourne, Victoria 3000, Australia Colombo 2, Sri Lanka Chicago, IL 60604 USA Tel: (61) 3 9629 8380 Fax: (61) 3 9614 8309 Tel: (94) 11 2429 100 Fax: (94) 11 2429 199
Tel (1) 312 356 9000 Fax: (1) 312 356 9005 www.phillipcapital.com.au www.ashaphillip.net/home.htm INDIA: PhillipCapital (India) Private Limited No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013 Tel: (9122) 2300 2999 Fax: (9122) 6667 9955 www.phillipcapital.in
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Disclosures and Disclaimers
PhillipCapital (India) Pvt. Ltd. has three independent equity research groups: Institutional Equities, Institutional Equity Derivatives, and Private Client Group. This report has been prepared by Institutional Equities Group. The views and opinions expressed in this document may, may not match, or may be contrary at times with the views, estimates, rating, and target price of the other equity research groups of PhillipCapital (India) Pvt. Ltd. This report is issued by PhillipCapital (India) Pvt. Ltd., which is regulated by the SEBI. PhillipCapital (India) Pvt. Ltd. is a subsidiary of Phillip (Mauritius) Pvt. Ltd. References to "PCIPL" in this report shall mean PhillipCapital (India) Pvt. Ltd unless otherwise stated. This report is prepared and distributed by PCIPL for information purposes only, and neither the information contained herein, nor any opinion expressed should be construed or deemed to be construed as solicitation or as offering advice for the purposes of the purchase or sale of any security, investment, or derivatives. The information and opinions contained in the report were considered by PCIPL to be valid when published. The report also contains information provided to PCIPL by third parties. The source of such information will usually be disclosed in the report. Whilst PCIPL has taken all reasonable steps to ensure that this information is correct, PCIPL does not offer any warranty as to the accuracy or completeness of such information. Any person placing reliance on the report to undertake trading does so entirely at his or her own risk and PCIPL does not accept any liability as a result. Securities and Derivatives markets may be subject to rapid and unexpected price movements and past performance is not necessarily an indication of future performance. This report does not regard the specific investment objectives, financial situation, and the particular needs of any specific person who may receive this report. Investors must undertake independent analysis with their own legal, tax, and financial advisors and reach their own conclusions regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realised. Under no circumstances can it be used or considered as an offer to sell or as a solicitation of any offer to buy or sell the securities mentioned within it. The information contained in the research reports may have been taken from trade and statistical services and other sources, which PCIL believe is reliable. PhillipCapital (India) Pvt. Ltd. or any of its group/associate/affiliate companies do not guarantee that such information is accurate or complete and it should not be relied upon as such. Any opinions expressed reflect judgments at this date and are subject to change without notice. Important: These disclosures and disclaimers must be read in conjunction with the research report of which it forms part. Receipt and use of the research report is subject to all aspects of these disclosures and disclaimers. Additional information about the issuers and securities discussed in this research report is available on request. Certifications: The research analyst(s) who prepared this research report hereby certifies that the views expressed in this research report accurately reflect the research analyst’s personal views about all of the subject issuers and/or securities, that the analyst(s) have no known conflict of interest and no part of the research analyst’s compensation was, is, or will be, directly or indirectly, related to the specific views or recommendations contained in this research report. Additional Disclosures of Interest: Unless specifically mentioned in Point No. 9 below: 1. The Research Analyst(s), PCIL, or its associates or relatives of the Research Analyst does not have any financial interest in the company(ies) covered in this report. 2. The Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively do not hold more than 1% of the securities of the company (ies)covered in this report as of the end of the month immediately preceding the distribution of the research report. 3. The Research Analyst, his/her associate, his/her relative, and PCIL, do not have any other material conflict of interest at the time of publication of this research report. 4. The Research Analyst, PCIL, and its associates have not received compensation for investment banking or merchant banking or brokerage services or for any other products or services from the company(ies) covered in this report, in the past twelve months. 5. The Research Analyst, PCIL or its associates have not managed or co‐managed in the previous twelve months, a private or public offering of securities for the company (ies) covered in this report. 6. PCIL or its associates have not received compensation or other benefits from the company(ies) covered in this report or from any third party, in connection with the research report. 7. The Research Analyst has not served as an Officer, Director, or employee of the company (ies) covered in the Research report. 8. The Research Analyst and PCIL has not been engaged in market making activity for the company(ies) covered in the Research report. 9. Details of PCIL, Research Analyst and its associates pertaining to the companies covered in the Research report:
Sr. no. Particulars Yes/No 1 Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for No investment banking transaction by PCIL 2 Whether Research Analyst, PCIL or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the No company(ies) covered in the Research report 3 Whether compensation has been received by PCIL or its associates from the company(ies) covered in the Research report No 4 PCIL or its affiliates have managed or co‐managed in the previous twelve months a private or public offering of securities for the No company(ies) covered in the Research report 5 Research Analyst, his associate, PCIL or its associates have received compensation for investment banking or merchant banking or No brokerage services or for any other products or services from the company(ies) covered in the Research report, in the last twelve months
Independence: PhillipCapital (India) Pvt. Ltd. has not had an investment banking relationship with, and has not received any compensation for investment banking services from, the subject issuers in the past twelve (12) months, and PhillipCapital (India) Pvt. Ltd does not anticipate receiving or intend to seek compensation for investment banking services from the subject issuers in the next three (3) months. PhillipCapital (India) Pvt. Ltd is not a market maker in the securities mentioned in this research report, although it, or its affiliates/employees, may have positions in, purchase or sell, or be materially interested in any of the securities covered in the report. Suitability and Risks: This research report is for informational purposes only and is not tailored to the specific investment objectives, financial situation or particular requirements of any individual recipient hereof. Certain securities may give rise to substantial risks and may not be suitable for certain investors. Each investor must make its own determination as to the appropriateness of any securities referred to in this research report based upon the legal, tax and accounting considerations applicable to such investor and its own investment objectives or strategy, its financial situation and its investing experience. The value of any security may be positively or adversely affected by changes in foreign exchange or interest rates, as well as by other financial, economic, or political factors. Past performance is not necessarily indicative of future performance or results.
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Sources, Completeness and Accuracy: The material herein is based upon information obtained from sources that PCIPL and the research analyst believe to be reliable, but neither PCIPL nor the research analyst represents or guarantees that the information contained herein is accurate or complete and it should not be relied upon as such. Opinions expressed herein are current opinions as of the date appearing on this material, and are subject to change without notice. Furthermore, PCIPL is under no obligation to update or keep the information current. Without limiting any of the foregoing, in no event shall PCIL, any of its affiliates/employees or any third party involved in, or related to computing or compiling the information have any liability for any damages of any kind including but not limited to any direct or consequential loss or damage, however arising, from the use of this document. Copyright: The copyright in this research report belongs exclusively to PCIPL. All rights are reserved. Any unauthorised use or disclosure is prohibited. No reprinting or reproduction, in whole or in part, is permitted without the PCIPL’s prior consent, except that a recipient may reprint it for internal circulation only and only if it is reprinted in its entirety. Caution: Risk of loss in trading/investment can be substantial and even more than the amount / margin given by you. The recipient should carefully consider whether trading/investment is appropriate for the recipient in light of the recipient’s experience, objectives, financial resources and other relevant circumstances. PCIPL and any of its employees, directors, associates, group entities, or affiliates shall not be liable for losses, if any, incurred by the recipient. The recipient is further cautioned that trading/investments in financial markets are subject to market risks and are advised to seek trading/investment advice before investing. There is no guarantee/assurance as to returns or profits or capital protection or appreciation. PCIPL and any of its employees, directors, associates, group entities, affiliates are not inducing the recipient for trading/investing in the financial market(s). Trading/Investment decision is the sole responsibility of the recipient. For U.S. persons only: This research report is a product of PhillipCapital (India) Pvt Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S.‐regulated broker‐dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker‐dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances, and trading securities held by a research analyst account. This report is intended for distribution by PhillipCapital (India) Pvt Ltd. only to "Major Institutional Investors" as defined by Rule 15a‐6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by the U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated, and/or transmitted onward to any U.S. person, which is not a Major Institutional Investor. In reliance on the exemption from registration provided by Rule 15a‐6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, PhillipCapital (India) Pvt Ltd. has entered into an agreement with a U.S. registered broker‐dealer, Decker & Co, LLC. Transactions in securities discussed in this research report should be effected through Decker & Co, LLC or another U.S. registered broker dealer
PhillipCapital (India) Pvt. Ltd. Registered office: No. 1, 18th Floor, Urmi Estate, 95 Ganpatrao Kadam Marg, Lower Parel West, Mumbai 400013
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