1 May 2017
EQUITIES Indian Media MEDIA
Looking for opportunities on new broadband pipes India
Broadband connectivity is creating new opportunities for IP Rajiv Sharma* owners and content aggregators to monetize Analyst HSBC Securities and Capital Markets (India) Private Limited [email protected] Global broadcasters see a large opportunity in leveraging their +9122 2268 1239 brands; video players want to maximize reach now Darpan Thakkar* Analyst HSBC Securities and Capital Markets (India) Private Limited Maintain Hold on Dish TV, Reduce on Zee TV and Sun TV and [email protected] +9122 6164 0695 Buy on Hathway
* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is We attended APOS 2017 organized by Media Partners Asia (MPA) on 26-27 April. not registered/ qualified pursuant to FINRA regulations Broadcasters, video players, telcos and OTT (over-the-top) players across the globe participated in the conference. In this report we highlight the digital strategies that various companies talked about in the conference and the key takeaways.
Staying relevant in emerging ecosystem. There seems to be agreement across players that video is the new form of entertainment and global video giants are looking at ways to improve user experience, be it Facebook with its automatic play feature or YouTube with its effort to lower data usage costs for end subscribers. On the other hand, broadcasters with a global reach (particularly the large US-based players) seem to have a clear brand focus and plan to leverage these brands by expanding footprints with a focus on Asia and the mobile platform in these markets. Additionally broadcasters recognise that they need to have some form of OTT, at least having a foot in the door to seize the next possible opportunity in monetization through subscription/advertising and at the same time defend themselves from potential technology distribution especially from direct-to-consumer video platforms. Direct-to-consumer video businesses Netflix and Amazon emphasized their focus on local content and footprint expansion. Amazon seems to be more aggressive with its local content approach, particularly with what we see in their India rollout. Netflix seems to be more focussed on leveraging global scale and penetrating markets with a gradual increase/iteration around local content.
Indian media companies were pleased about mobile data tariffs declining, particularly driven by Jio’s 4G launch. The OTT market in India at present is largely AVOD and led by large broadcasters, the broadcasters making tv content available online and not investing in original programming for online distribution with their OTT platforms. On the other hand, there are a few SVOD focussed OTT players such as Amazon Prime, Netflix and ATL that see an opportunity with a niche segment willing to pay for exclusive original and premium content. Separately, cable TV players attempting to address the opportunity via leveraging cable infrastructure to deliver home broadband, and DTH operators with their MiFID II – Research launch of smart set top boxes see an opportunity in aggregating content and being the Is your access agreed? interface between end consumer and online content providers. Hold Dish TV, Reduce CONTACT us today Zee TV/Sun TV and Buy Hathway (all estimates and TPs unchanged).
Disclosures & Disclaimer Issuer of report: HSBC Securities and Capital Markets (India) Private Limited This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at: https://www.research.hsbc.com
EQUITIES ● MEDIA 1 May 2017
Digital revolution unsettling the TV industry
Putting things in context
Before we talk about the digital strategy that various media players highlighted in APOS 2017, we discuss how the TV industry is facing disruption and changes with the expansion in mobile and home broadband. Growth in advanced broadband connectivity both in homes and mobile (driven by 4G expansion which can deliver video) is an emerging threat to the traditional TV ecosystem as streaming video and online content evades traditional content aggregation and distribution models and upsets relationships in the TV value chain. Expansion of the broadband pipe has seen huge growth in OTT players globally and, as particularly seen in the US, consumers are giving up their pay TV subscription given the various alternatives available. An additional challenge is that broadcast networks, which have been the preferred platforms of advertising given their ability to provide advertisers with significant reach and mass viewing, face the risk of being replaced by OTT platforms that directly reach out to consumers with engaging content. Moreover online platforms with their ability to provide real-time bidding and better demographic targeting can get more traction from advertisers. That said, we do not think it is end of the road for the TV industry as it too can address potential threats from OTT players by directly reaching out to their consumers over the internet and having their own OTT strategy. OTT strategy can be via having OTT play for each channel/brand, or via a one-stop OTT app for content across the network/group, or via collaborating with existing OTT players or investing in leading OTT/digital platforms (majority or minority investment).
Let’s start talking
Here we highlight the digital strategy that some of the participating companies talked about in APOS 2017.
Global video giants expanding reach
YouTube (Not listed) The company suggested that mobile consumption has increased significantly and its 65% of the search is driven by recommendations on incremental focus going forward is to capture the smart TV screen. YouTube has been working YouTube in multiple ways to optimize bandwidth and reduce data consumption and data costs for the end consumer. About 65% of the search is driven by recommendations and hence the focus on improving the recommendation algorithm. Monetization remains the focus, cost per click (CPM) varies across markets and the launch of new products like YouTube Kids and YouTube TV remain an integral part of the overall growth plans for the company. YouTube Kids is seeing good traction and has 10m daily users. Key metrics include daily active users, total watched time and total revenues.
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Netflix (NFLX US, Not rated) OTT platforms can help extend channel brands The company has launched simultaneously into 130 markets and these are iterative launch. beyond the traditional pay TV Netflix is a direct-to-consumer business and its focus is on consumer devices and working with audience telcos is a new part of the business. It has developed an understanding of different local markets and Japan and Australia are seeing a pick up. Key metrics the company focuses on are viewing hours and retention. It suggested that voluntary churn is an important metric as it allows it to understand what is not working in a specific market. A big focus is on local content and most of the engagement goes through TV/smart TV directly or indirectly. Mobile is complimentary for Netflix, as consumers access content across devices. Mexico has been a great learning curve for the company as initially the market witnessed high churn; however with targeted spending the viewing hours picked up and churn came down. Global scale allows Netflix to have larger budgets and resources as the content can be amortized over a larger viewing base. In India the partnerships with Airtel and Videocon are an early attempt to learn about the market. Focus is not 200m subscribers, rather on high targeted subscribers who can pay for the content. Even in Mexico, the price point was not tweaked even though there was early feedback that prices were too high. Netflix is not keen to drive growth via lowering price points.
Facebook (FB US, Not rated) The company suggested that the video system continues to evolve and it has seen major shifts. In the early days it started with a desktop focus and now it is all about mobile and mobile videos. Facebook suggested that the shift to video is significant as people want to be informed and entertained and video is a big part of communication today. One of the biggest rollouts has been auto-play with videos which was a controversial decision for the company; however mobile optimisation is driving discovery and distribution. Another recent rollout has been Live 360 and new service will be video tab. Consumer insight and analytics referring to which subscribers viewed a particular content and company intends to drive direct monetization with live videos and generate real direct value for publishers. Another incremental effort with branded content is to tag a sponsor and drive distribution, allowing the publisher to keep a large part of the revenues.
Amazon (AMZN US, Not rated) The company plans to have 60% of the content as local. It is of the view that the entire user base cannot be categorized under a target segment/group. Japan has seen a dramatic ramp-up for the company and it is launching in the Indian market with about 18 original shows at launch itself. Amazon is excited about its India launch and 10 hours format (content which is made on the lines of movies will be made available over a longer format vs. movies that run for 2-3 hours) of feature film-based shows.
Access is an entry barrier for Viu (Not Listed) digital products and low Viu suggested that it was focused on user engagement and that it had 6m active users with 1.6 credit card penetration in hours of average viewing. This engagement was not only driven by Asian acquired content but emerging markets is a big also by its investment in originals. The company identified opportunities with both EVOD and deterrent SVOD services. Recently it launched four shows in India and the new originals were taking 30% share of the views. The company suggested that it was producing 3,000 hours of content in Hong Kong and that it plans to leverage these production capabilities going forward. So far the Korean content/dramas have been a core driver of consumption.
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Global broadcasters going digital and leveraging brands
Walt Disney International (DIS US, Not rated) The company has a big focus around Disney brands and the idea is to replicate the same strategy which the company followed in analogue for digital as well. It intends to leverage the brands and create a digital ecosystem around them, and as such it feels no need to directly compete with Netflix. DisneyLife is the start of the digital ecosystem initiative and as of now is only available in the UK; the company is very happy about the growth the service is seeing. DisneyLife is Disney’s own streaming subscription service providing access to all the studio movies and TV shows and access to the extensive library of e-books, audio books and music. Disney is of the view that in the near term the traditional linear TV EPG (Electronic Program Guide) will be a thing of the past and channels will transform to personalized playlists/curated playlists. Telcos offer much value and their scale is encouraging. South Asia is a mobile- dominated data market and hence the company believes that working and partnering with telcos is very important. Along these lines Disney has got into its own branded handsets and in Japan has partnered with DoCoMo (9437 JP, JPY2,688, Buy) and in Philippines with Globe Telecom (GLO PM, PHP2078, Hold). The company is getting into local content creation/local branded movies and different content formats. India had its issues in the past but now growth is coming back, particularly in the movie business with in-house blockbuster “Dangal” and launch of 4G services by Jio (Not listed), which Disney views as positive for the digital ecosystem.
Fox Networks Group (Not listed) There is a lot of good content and a huge volume of content; getting access to the content is Disney believes that TV EPG will become obsolete and difficult. Given this the company’s prime focus is consumer experience. Hence Fox wants one channels will transform into place for all Fox content with videos of all past seasons. Content has been aggregated to give a personalized playlists across TV-like experience and environment. The idea of a gatekeeper has gone away and now the power the broadcasting space is with the consumers. That said, there is a strong case to align consumer needs with business models and USD8 per month is not feasible and there is a need to balance. Similarly Hotsar in India has content across categories and operates along similar lines. The company suggested that customers want to access the same content across multiple streams and it is focussed on meeting these consumer demands. It is important to own content, not necessarily 100% but to have enough control over it. The company believes the future is aggregated digital MVPDs.
NBC Universal (Not Listed) One clear approach is that the company will not be a cable controlled content business, the content business will be on its own. It recently made an investment of USD500m in Snapchat (CNBC article dated 3 March 2017). We add that on similar lines the company invested cUSD400m in BuzzFeed News and USD200m in Vox Media and owns a 30% stake in Hulu (Bloomberg, November 21 2016). Unlike some of the big US majors that are focusing on large acquisitions as part of a digital drive, NBC has a different strategy with minority investments in a handful of players. Through such investments the company gets the benefit of insights about younger viewers, particularly the millennials, and moreover this allows NBC to reach the younger audience. NBC suggested that it had an understanding of both the content side and the distribution side of the business and intends to work with platforms well in advance. It is focussed on producing original local content and attractive remuneration for content creation plays an important part in talent retention.
Increasingly, people want news and entertainment on mobile phone. We need to respect that. - Steve Burke, NBC Universal (Los Angeles Times)
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Viacom International Media Networks (Not Listed) The company suggested that it was focussed on leveraging its six brands and at the same time expanding footprint and recent examples were the launch of Comedy Central in Thailand and Vietnam. It recently also launched Play Plex across 46 different countries. The focus is on monetizing key brands and Asia is taking the lead. It recently launched a theme park hotel in the Philippines. It see growth in traditional pay TV and focus is via expanding footprints. Further the company sees growth and opportunities in mobile and mentioned the Jio launch as a data growth drive in the Indian market. Viacom also made its linear channels available on Jio play. The company has a growth partnership with Telekomsel and believes that incremental success will be about local content.
Telcos getting involved with digital content
GlobeTelecom (GLO PM, PHP2078, Hold, TP PHP1700) Globe suggested that it had a very content-centric proposition and it embraced video and Telco partnership allows digital platforms to tap a content to drive higher data demand. Investment of as much as USD800m has been made in large part of the population the network to replace the entire network and drive data demand. Subscribers across the having access to a payment network are tiered and ARPUs range between USD2 and USD20. The company offers a 1m option retail distribution network and payment mechanism, hence providing content providers with a way to reach consumers and get payment through subscribers. To begin with the company launched Free Facebook access for almost six months. The Philippines is largely a Free to Air (FTA) market and cable penetration is less than 2m subscribers. On the other hand, Globe has 95% population coverage with a large portion of the subscribers being on 3G or 4G. Incremental focus is on LTE coverage and increasing it further as it enables video. The company is attempting to grow the video market and share the risks with the content providers.
INDOSAT (ISAT IJ, IDR7,175, Buy, IDR7,800) In markets like Indonesia, the Philippines and Thailand OTT One of the biggest challenges for any operator is ensuring seamless downloads and once a platforms are getting reach download initiates, usage expands for subscribers. The company suggested that to facilitate from telcos they could never seamless downloads it was necessary that both the OTT player and the telcos work together. get with Pay TV Service bundling is critical to expand data services and clearly local content has huge demand.
Telkomsel (not listed)
Telkomsel attempts to differentiate brands with entertainment and customer experience. It has made significant investments in network and has partnered with various content providers including Hooq/ Viu/Viacom for Nick products. For any content provider to have a direct relationship with the consumer will be difficult as it will be challenging to collect money and manage regulations. Hence Telekomsel has decided to play an aggregator role. Furthermore Indonesian customers view content differently and there is a need to package content in weekly/daily sachets; hence there is a case to revisit the minimum guarantee model in such a scenario. The company is clear that it will not make the mistake of a walled garden approach (ring fencing access to content) and its consumer insights suggest that long form content does not work in a pay TV environment. Generalizing the content demand in Asia could be wrong as the company is of the view that there is huge opportunities for content in local language. Overall the company is strategically focused on data as it believes voice and SMS have limited opportunities for growth.
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Indian media, telcos and OTT having a foot in the door
Zee (Z IN, INR527, Reduce, IDR436) Zee is present in 171 countries and recent launches have been in Germany and Spain. The movie business has been an entry point for the company globally and the approach has been to cover it with more general entertainment series. The US is one of the most important markets with Zee being the largest multi-broadcaster there and having an exclusive relationship with Sling TV. Similarly the Middle East has been a good market for the company and it plans to do an original Arabic series as well in the coming days, producing in local language. Another strategy has been getting insights about markets with the program licensing business, and markets like Indonesia and Thailand which are regulated the company syndicates to the main platforms. Some of the largest shows in Indonesia were Indian shows and in this market Zee is licensing content to FTA broadcasters. In Thailand the company recently re-launched its channels and sees a much bigger opportunity. So far the content in most of the international markets has been Indian content dubbed in regional languages; however going forward, the company plans to start producing in Arabic, non-fiction shows in Thailand, the US and Singapore and scripted shows in the UK and Canada.
Viacom India (not listed) Per the company it is incorrect to assume that growth for linear TV is not there as TV penetration was only 65% of the TV households. As such, there is a long way for TV to grow and there are robust opportunities in the ad market. Viewership in India at 3 hours and 20 minutes (per week) is far lower versus South East Asia at 4 hours and 30 minutes and the US at 6 hours. The Indian market is likely to be a combination of TV and digital and pay and free will co-exist. FTA channels will drive growth at the lower end of the market. On digital, the company suggested that both the AVOD and SVOD models will co-exist.
Jio (not listed) Limited storage capacity averaging around 8GB is a Jio has 112m subscribers and India is the first exabyte market in the world; the company sees one big challenge in the India growing to a 3 exabyte market in a few years. Jio’s network carries more data than all Indian handset ecosystem telcos put together. 70% of the traffic which Jio sees is video. Facebook and YouTube have seen robust growth post Jio launch. Demand for content is likely to increase dramatically and the company is happy that Amazon and Netflix were growing the content ecosystem in India as it wants to create a fat broadband pipe (huge data capacity) which is accessible to all. Through Viacom the company is creating plenty of local content and it sees mobile viewing in India as much larger than big screen viewing. One big challenge in the Indian handset ecosystem is limited storage capacity averaging around 8GB, which implies that Indian subscribers delete old applications to accommodate new apps.
Amazon Prime Video (India) (AMZN US, not rated) Amazon recently launched its streaming device, the Amazon Fire TV stick. Some of the popular apps on the Fire TV platform include Prime Video, Netflix and YouTube among others. Interface on the Fire TV stick allows users to monitor data usage and allows voice-based search. The company suggested that 95% of the Indian market is prepaid and the focus is to give consumers the ability to choose what they would like to watch in HD but with low data usage and the ability to watch offline as well. Amazon suggested that India was the only market where the company was launching with 18 original shows. It is working with film production houses and plans to deliver film quality content in episode format.
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Indian OTT players mass market versus niche
Hotstar (not listed) Hotstar has followed a strategy to aggregate TV shows, movies and sports in one platform and not to differentiate in the three broad categories. An early challenge was expensive data, however the recent data tariff correction has been positive. Most people in India will discover internet over mobile; hence its focus has been to evolve the user experience on mobile screens. Another focus has been tech and its DNA has been storytelling. It suggested that the agenda of consumption growth is not separate from monetisation and ad monetisation is picking up. Advertisers are starting to see that digital is a viable platform and ad revenues are picking up.
VOOT (not listed) VOOT is an 11 months old platform with 18m users and 2m daily users. The most encouraging trend has been the watch time, averaging 50 minutes daily per user. As present it is more about leveraging content on Viacom and incrementally the company will be getting into original content. Top layers of TV market which include 10-20m TV households is no longer finding much relevance with the TV content. Similarly, there are opportunities in the kids genre. Hence the company sees opportunities in both these segments which should allow opportunities for digital platforms.
ALT (BLJT IN, not rated)
The company has a focus on premium original and exclusive content. Broadcasters in India currently have a mirror and catch-up strategy as far as digital/OTT is concerned. ALT sees a big gap in content in terms of storytelling which TV cannot do and movies will not do. The company is focussing on addressing this gap. It recently launched in over 60 countries with a subscription business model. It strategy is free content up to five episodes and post that the consumer will need pay. Current pricing is very cheap at INR300 for the entire year. One of the real barriers to access was explosive data costs, however post Jio launch the 4G market has expanded and in India people will watch long format on mobiles as well. The company is targeting 5-10m subscribers with its originals and exclusive content approach. It is possible that at a later stage the company looks at syndication, but as of now the strategy is to be exclusive.
Tata Sky (not listed) FTA channels are good for business as they allow the 100m non-TV households to adopt TV. Pricing for DTH has not been based on what the consumer However the concern has been that ‘windowing’ of content between pay and FTA has is willing to pay, instead it shortened to as low as 7 days in some instances and this has hurt the DTH players. Separately has been benchmarked to there is lot of opportunity for the subscriber base to grow for DTH platforms as Phase 4 is a 70m analogue pricing as the cable plus opportunity and it will take 3-4 years to capture this subscriber base. DTH ARPUs can provider makes no payment increase with upselling, cross-selling and increases in prices of analogue cable. The company to the broadcaster or the has a total of 14m subscribers, of which 2m have access to high speed broadband and will be government. Once analogue pricing goes up, DTH ARPUs the key driver for digital content. Tata suggested that it can play a key role in connecting users will improve as well to digital content by being the interface between the subscriber and online content providers. The company sees an opportunity in making the search for digital content easier for consumers.
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Figure 1: Steady increase in pack prices by VDTH has allowed for rising ARPU]
700 650 590 605 600 521 484 500 440 440 400 253 275 300 217 217 241 180 200 149 100 0 Apr 11 Apr 12 Apr 13 Apr 14 Feb 15 Sep 15 Mar 16 HD base pack price (INR) SD base pack price (INR)
Source : Company data
Figure 2: Ratings and TPs summary table Current TP Rating Upside/ Market cap 3m ADTV Company Ticker Currency price downside (USDm) (USDm) Zee Entertainment Z IN INR 526.85 436 Reduce -17.2% 7,868 13 Dish TV India DITV IN INR 95.10 103 Hold +8.3% 1,576 11 Sun TV Network SUNTV IN INR 921.75 690 Reduce -25.1% 5,648 30 Hathway Cable & Datacom HATH IN INR 43.70 58 Buy +32.7% 564 1 Source: HSBC estimates. Priced as of close at 28 April 2017
Valuation and risks
Dish TV Core business. We continue to value Dish TV using a DCF approach. We use a cost of equity of 9.0% (unchanged and incorporates global risk-free rate of 2.5%), a cost of debt of 11% and a WACC of 9.0% (unchanged). We value the core business at INR93 per share. Potential catalysts. We do see margin upside from potential reduction in license fees, merger with VDTH and cost savings if the GST rate were to come in at 18%. Potential margin upside could be anything between 500-600bp from the aforesaid catalysts and we value this at INR20 per share, however given that the aforesaid factors need some kind of regulatory approval, we factor them in at a 50% discount at INR10 per share. Target price. Our TP is INR103, which implies 8.3% upside from current levels. We maintain a Hold rating – as core business remains weak and both ARPU and subscriber growth continues to decline.
Figure 3: Computing target price Particulars (INR) Fair value of core business 93 Upside from potential catalysts 10 Target price 103 Source: HSBC estimates
Upside risks: 1) a lower-than estimated increase in content costs; 2) higher-than-estimated increase in ARPU; 3) reduction in competitive intensity from Free Dish which could improve subscriber growth. Downside risks: 1) a higher than-estimated decline in ARPU if larger proportion of incremental subscribers were to come onto lower-end plans; and 2) faster-than- estimated rollout of fiber to home and integrated TV and broadband offerings by 4G new entrants, particularly Jio; 3) higher-than-estimated increase in content costs.
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Sun TV We continue to use core business using DCF with a cost of equity at 9.0%, cost of debt at 10.5% (unchanged) and WACC at 8.7%. Our value for core business is INR650. We have INR40 per share to factor in a possible digitization in Tamil Nadu. We compute this upside using DCF with a similar set of assumptions as used for the core business and assuming digital cable penetration of c50% (rest of the TV household market being owned by DTH, both public sector and private players) and an incremental yield of INR20 per month per household. With the addition of this upside to our core business fair value we arrive at our TP of 690 per share.
Figure 4: Computing target price (INR) Core business 650 Potential upside from Tamil Nadu digitization 40 Target price 690 Source: HSBC estimates
Our TP implies downside of 25.1% and we have a Reduce rating on the stock. Upside risks: 1) earlier-than-estimated progress in digitization in Phase 3 and 4 markets and earlier than estimated digitization in Tamil Nadu; 2) ability of the company to take meaningful ad rate hikes this fiscal year may beat our estimates on ad revenue growth; 3) higher-than-estimated improvement in EBITDA margins.
Zee TV We continue to value the stock using DCF and our TP is INR436. Our assumptions include a cost of equity at 9.0 % (unchanged), cost of debt at 10.5 % and a WACC of 9.0% (risk-free rate of 2.5%, ERP of 6.5% and beta of 1, all unchanged). Our TP of INR436 implies 17.2% downside. We maintain a Reduce rating on the stock as we believe it has run ahead of fundamentals and we are concerned about the upcoming regulations which in our view are likely to be negative for ad and subscription revenue growth.
Upside risks: 1) higher-than-estimated ad growth; 2) sharp improvement in cable TV ARPU could boost subscription revenues significantly from Phase 1 and 2 markets; 3) a significant delay in implementation of the new tariff regime and regulator allowing broadcasters to bundle free and pay channels.
Hathway Cable & Datacom We continue to value Hathway using a DCF approach. We use a cost of equity of 9.0% (unchanged), a cost of debt of 11% and a WACC of 9.0%, arriving at a fair value of INR58. Our TP implies 32.7% upside from current levels; thus, we maintain a Buy rating on the stock.
Downside risks: 1) higher-than-expected disruption by 4G entrants; 2) lower-than-estimated increase in ARPU; and 3) lower-than-estimated pick-up in the broadband subscriber base.
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Disclosure appendix
Analyst Certification The following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that the opinion(s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Rajiv Sharma and Darpan Thakkar
Important disclosures Equities: Stock ratings and basis for financial analysis HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should carefully read the entire research report and not infer its contents from the rating because research reports contain more complete information concerning the analysts' views and the basis for the rating.
From 23rd March 2015 HSBC has assigned ratings on the following basis: The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12 months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more than 20% below the current share price, the stock will be classified as a Reduce.
Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage, change in target price or estimates).
Upside/Downside is the percentage difference between the target price and the share price.
Prior to this date, HSBC’s rating structure was applied on the following basis: For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate, regional market established by our strategy team. The target price for a stock represented the value the analyst expected the stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as Overweight, the potential return, which equals the percentage difference between the current share price and the target price, including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.
*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12 months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However, stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating, however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.
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Rating distribution for long-term investment opportunities As of 01 May 2017, the distribution of all independent ratings published by HSBC is as follows: Buy 45% ( 25% of these provided with Investment Banking Services ) Hold 40% ( 25% of these provided with Investment Banking Services ) Sell 15% ( 18% of these provided with Investment Banking Services )
For the purposes of the distribution above the following mapping structure is used during the transition from the previous to current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis for financial analysis” above.
For the distribution of non-independent ratings published by HSBC, please see the disclosure page available at http://www.hsbcnet.com/gbm/financial-regulation/investment-recommendations-disclosures.
Share price and rating changes for long-term investment opportunities Dish Tv India Ltd (DSTV.BO) share price performance Rating & target price history INR Vs HSBC rating history From To Date Analyst Underweight Neutral 20 May 2014 Rajiv Sharma 120 Neutral Overweight 09 Jan 2015 Rajiv Sharma Overweight Buy 22 Apr 2015 Rajiv Sharma 110 Buy Hold 11 Jan 2016 Rajiv Sharma 100 Target price Value Date Analyst 90 Price 1 59.00 20 May 2014 Rajiv Sharma 80 Price 2 67.00 25 Jul 2014 Rajiv Sharma 70 Price 3 85.00 09 Jan 2015 Rajiv Sharma Price 4 95.00 27 Jan 2015 Rajiv Sharma 60 Price 5 110.00 27 May 2015 Rajiv Sharma 50 Price 6 120.00 30 Jul 2015 Rajiv Sharma 40 Price 7 110.00 11 Jan 2016 Rajiv Sharma Price 8 80.00 17 Feb 2016 Rajiv Sharma
Price 9 87.00 25 May 2016 Rajiv Sharma
May-13 May-14 May-15 May-16 May-17 May-12 Price 10 102.00 22 Jul 2016 Rajiv Sharma Source: HSBC Price 11 98.00 31 Oct 2016 Rajiv Sharma Price 12 103.00 24 Mar 2017 Rajiv Sharma Source: HSBC Hathway Cable & Datacom (HAWY.BO) share price Rating & target price history performance INR Vs HSBC rating history From To Date Analyst Neutral Overweight 20 Nov 2014 Rajiv Sharma Overweight Overweight (V) 09 Jan 2015 Rajiv Sharma 84 Overweight (V) Buy 30 Apr 2015 Rajiv Sharma 74 Target price Value Date Analyst Price 1 86.40 20 Nov 2014 Rajiv Sharma 64 Price 2 86.40 09 Jan 2015 Rajiv Sharma 54 Price 3 76.00 30 Apr 2015 Rajiv Sharma Price 4 72.00 13 Aug 2015 Rajiv Sharma 44 Price 5 67.00 09 Nov 2015 Rajiv Sharma Price 6 63.00 11 Jan 2016 Rajiv Sharma 34 Price 7 58.00 22 Jul 2016 Rajiv Sharma
24 Source: HSBC
May-17 May-13 May-14 May-15 May-16 May-12 Source: HSBC
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Sun TV Network (SUTV.NS) share price performance INR Rating & target price history Vs HSBC rating history From To Date Analyst Neutral (V) Neutral 12 Nov 2014 Rajiv Sharma 924 Neutral Hold 22 Apr 2015 Rajiv Sharma Hold Reduce 06 Apr 2017 Rajiv Sharma 824 Target price Value Date Analyst 724 Price 1 366.00 12 Nov 2014 Rajiv Sharma 624 Price 2 370.00 22 Apr 2015 Rajiv Sharma Price 3 366.00 01 Jun 2015 Rajiv Sharma 524 Price 4 428.00 11 Jan 2016 Rajiv Sharma 424 Price 5 388.00 16 Feb 2016 Rajiv Sharma Price 6 415.00 22 Jul 2016 Rajiv Sharma 324 Price 7 460.00 21 Jan 2017 Rajiv Sharma 224 Price 8 690.00 06 Apr 2017 Rajiv Sharma
Source: HSBC
May-13 May-14 May-15 May-16 May-17 May-12 Source: HSBC
Zee Entertainment (ZEE.NS) share price performance Rating & target price history INR Vs HSBC rating history From To Date Analyst Neutral Underweight 22 May 2014 Rajiv Sharma 571 Underweight Hold 22 Apr 2015 Rajiv Sharma Hold Reduce 11 Jan 2016 Rajiv Sharma 521 Reduce Hold 17 Feb 2016 Rajiv Sharma 471 Hold Reduce 17 May 2016 Rajiv Sharma 421 Target price Value Date Analyst 371 Price 1 270.00 22 May 2014 Rajiv Sharma 321 Price 2 275.00 21 Jul 2014 Rajiv Sharma 271 Price 3 325.00 09 Jan 2015 Rajiv Sharma 221 Price 4 357.00 16 Jul 2015 Rajiv Sharma 171 Price 5 380.00 11 Jan 2016 Rajiv Sharma 121 Price 6 406.00 11 May 2016 Rajiv Sharma Price 7 436.00 31 Aug 2016 Rajiv Sharma
Price 8 440.00 19 Oct 2016 Rajiv Sharma
May-13 May-14 May-15 May-16 May-17 May-12 Price 9 444.00 25 Oct 2016 Rajiv Sharma Source: HSBC Price 10 436.00 18 Jan 2017 Rajiv Sharma Source: HSBC To view a list of all the independent fundamental ratings disseminated by HSBC during the preceding 12-month period, please use the following links to access the disclosure page:
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HSBC & Analyst disclosures Disclosure checklist
Company Ticker Recent price Price date Disclosure SUN TV NETWORK SUTV.NS 921.75 28 Apr 2017 4, 7 Source: HSBC
1 HSBC has managed or co-managed a public offering of securities for this company within the past 12 months. 2 HSBC expects to receive or intends to seek compensation for investment banking services from this company in the next 3 months. 3 At the time of publication of this report, HSBC Securities (USA) Inc. is a Market Maker in securities issued by this company. 4 As of 31 March 2017 HSBC beneficially owned 1% or more of a class of common equity securities of this company. 5 As of 31 March 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of investment banking services. 6 As of 31 March 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-investment banking securities-related services.
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7 As of 31 March 2017, this company was a client of HSBC or had during the preceding 12 month period been a client of and/or paid compensation to HSBC in respect of non-securities services. 8 A covering analyst/s has received compensation from this company in the past 12 months. 9 A covering analyst/s or a member of his/her household has a financial interest in the securities of this company, as detailed below. 10 A covering analyst/s or a member of his/her household is an officer, director or supervisory board member of this company, as detailed below. 11 At the time of publication of this report, HSBC is a non-US Market Maker in securities issued by this company and/or in securities in respect of this company 12 As of 26 April 2017, HSBC beneficially held a net long position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. 13 As of 26 April 2017, HSBC beneficially held a net short position of more than 0.5% of this company’s total issued share capital, calculated according to the SSR methodology. HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt (including derivatives) of companies covered in HSBC Research on a principal or agency basis.
Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment banking, sales & trading, and principal trading revenues.
Whether, or in what time frame, an update of this analysis will be published is not determined in advance.
Economic sanctions imposed by the EU and OFAC prohibit transacting or dealing in new debt or equity of Russian SSI entities. This report does not constitute advice in relation to any securities issued by Russian SSI entities on or after July 16 2014 and as such, this report should not be construed as an inducement to transact in any sanctioned securities.
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Additional disclosures 1. This report is dated as at 01 May 2017.
2. All market data included in this report are dated as at close 28 April 2017, unless a different date and/or a specific time of day is indicated in the report.
3. HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner.
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Production & distribution disclosures 1. This report was produced and signed off by the author on 01 May 2017 06:13 GMT.
2. In order to see when this report was first disseminated please see the disclosure page available at https://www.research.hsbc.com/R/34/cJnFWHT
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Disclaimer
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