FY19-21 Ebitda estimates up 3-4% and TP revised to `90; consistency will be key.
Dish tv reported a well-rounded quarter — Ebitda increased 20% q-o-q driven by 6.5% q-o-q growth in ARPU, 2.6% q-o-q growth in subscribers and some cost savings. Impressively, strong performance was largely driven by ARPU growth; merger synergies will provide further boost in the coming quarters. We see early signs of turnaround in Dish TV’s Q1 print; consistency in performance will be key to stock performance. We raise our FY19-21e Ebitda estimates by 3-4% and target price to Rs 90 (Rs 84 earlier). Maintain Add.
Q1FY19—impressive show: Dish TV’s net subscriber addition of 301K was in line with our estimate. ARPU at Rs 214 increased 6.5% q-o-q (KIE Rs 208; +3.5% q-o-q). Operating costs declined 3% q-o-q due to non-recurrence of merger expenses of Rs 600 mn in Q4FY18; this was partly offset by forex loss of Rs 210 mn in Q1FY19. Ebitda at Rs 5.56 bn was marginally ahead of our estimates. Dish TV’s Q1FY19 print suggests that the company is on track to achieve/exceed its FY19 guidance.
Valuation: Our TP of Rs 90 values Dish TV at 7.5X FY2020e EV/Ebitda; our target multiple somewhat captures R-Jio risk. It also factors in potential payout of about Rs 2 bn pertaining to prior period licence fee liability. Dish TV has started FY19 and its post-merger journey on a good note. Consistency in performance can drive further upgrades and re-rating.