1. Dish TV shares fall over 15% post Q4 results, Edelweiss keeps ‘Buy’ rating with a TP of Rs 116

Dish TV shares fall over 15% post Q4 results, Edelweiss keeps ‘Buy’ rating with a TP of Rs 116

DishTV shares dipped over 15 per cent after the company posted a consolidated net loss of Rs 28.33 crore for the fourth quarter ended March 31 as against Rs 482.77 crore in January-March a year ago.

By: | Published: May 25, 2017 1:23 PM
DishTV shares dipped over 15 per cent after the company posted a consolidated net loss of Rs 28.33 crore for the fourth quarter ended March 31 as against Rs 482.77 crore in January-March a year ago.

Shares of Direct-to-home operator DishTV dipped over 15 per cent on Thursday after the company posted a consolidated net loss of Rs 28.33 crore for the fourth quarter ended March 31 as against Rs 482.77 crore in January-March a year ago. At 12.38 pm, Dish TV shares were trading 14.43 per cent down at Rs 78.60. The share price opened at Rs 84.50 and touched a high and low of Rs 87.50 and Rs 77.25, respectively, in trade so far. Sensex was trading 168.60 points up at 30,470.24 during the same time. Despite this, brokerage House Edelweiss has maintained a ‘Buy’ rating on the stock with target price of Rs 116, implying an upside of about 48 per cent.

The company’s subscription revenues during the quarter were lower by 11.1 per cent as against to the same quarter last year mainly following the absence of a major cricketing event as well as
package down gradation by existing subscribers. Its total income from operations stood at Rs 718.98 crore, down 12.44 per cent during the quarter under review as compared to Rs 821.15 crore in the corresponding quarter a year ago. Its total expenses were at Rs 748.07 crore, up 0.91 per cent, as against Rs 741.28 crore of Q4 of FY 2015-16.

The company’s average revenues per user (ARPU) declined as well. According to Reuters, analysts at Investec Securities wrote, “Trail impact of demonetization in Q4 was expected”. It further added that Dish has underperformed its peers significantly in Q4.

Brokerage House Edelweiss said that demonitisation had an impact on Dish TV’s subscription with Dish TV adding 0.165mn net subscribers in Q4FY17 as against 0.23mn estimate impacted by demonetisation. The brokerage House is bullish on the stock with ‘Buy’ recommendation at a target price of Rs 116. Below are the observation which Edelweiss made while manitaining the ‘Buy’ rating on the stock

– Dish TV’s ARPU stood at Rs 135 (down 11.2% QoQ) due to down-trading and demonetisation, leading to a fall in its subscription revenue to 10.3% QoQ. We expect the ARPU to improve in FY18, primarily in H2FY18, once the demonetisation impact fades.

– Dish TV’s Q4FY17 sales and EBITDA came below our expectations due to lower net additions and fall in ARPU. Key positives were: (i) Videocon d2h’s merger is on track & expected to be completed by October; and (ii) churn was stable at 0.9%. We perceive tariff order implementation, GST and Videocon d2h merger as potent catalysts.

– Phase III & IV markets were severely affected by demonetisation. Dish TV saw some down trading in HD subscribers to SD packs (temporary phenomena) due to demonetisation. We expect down trading to hurt the company in H1FY18. Q4FY17 had less number of days hence revenue was impacted by INR180-200mn. Dish TV expects 6-8% YoY increase in content cost in FY18. We expect the content cost to remain within the guided range largely due to Dish TV’s high bargaining power.

-Phase IV digitisation is likely to exert some pressure on ARPUs. Videocon d2h merger is on track and will lead to synergy benefits in FY19.

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