Our 3-5% Ebitda upgrade for FY15 and FY16 and roll-over of DCF drive increase in target price to Rs 65 (Rs 57 earlier). Dish TV stock is down 35% CYTD and has underperformed the Sensex by 37% largely due to margin disappointment and lower-than-expected incremental share in phase I/II digitisation.
Valuations have corrected sharply from ~15x one-year forward EV/Ebitda in December 2012 to <10x. Despite relatively higher earnings visibility vs MSOs due to its direct ownership of end subscribers, Dish TV is trading at ~30% discount vs Hathway on EV/proportionate subscriber basis.
We expect a favourable pricing environment, led by increasing transition to gross billing for phase I/II cable subscribers and phase III/IV digitisation.
Dish TV has increased strategic focus on ARPU/profitability and subscriber quality. During CY13, Dish TV has hiked entry prices thrice (9-13% each) and increased monthly pack rates by 5-10%, reflecting improving industry discipline. Although this has led to moderation in subscriber growth, other operating metrics have witnessed improvement: (a) Subscriber acquisition cost down 15% y-o-y; (b) monthly churn down to 0.6%, and (c) ARPU up 4% y-o-y to ~R165.
- Motilal Oswal