Dish TV India’s Q1FY20 Ebitda at Rs 530 crore beat our/consensus estimates on lower license fee outgo (down Rs 50 crore in Q1; FY20E benefit at Rs 200 crore), as DTH players revised revenue reporting to net of content (pass-through). Ebitda was also aided by cost rationalisation across manpower and overheads (partially due to synergy benefits from d2h merger). Q1 net ARPU (ex-taxes) was at Rs 116 (gross comparable ARPU at Rs 199 vs Rs 186 q-o-q); monthly churn rate was stable at 0.9%.
The management lowered FY20 net subscriber addition guidance to Rs 0.07 crore (Rs 0.12 crore earlier), but maintained Ebitda guidance at Rs 2,250-Rs 2,300 crore; we fine-tune our FY20-21E Ebitda by 2-5%, revising TP to Rs 37 (Rs 40 earlier; 5x FY21E EV/core Ebitda). At CMP, the stock is available at 10% FCF/EV yield (including all contingencies; 17% yield otherwise) on FY21E. High promoter pledge remains the biggest risk to rating.
The management highlighted almost equal mix of a-la-carte channels and package-based subscribers in Q1. We believe this may change (lower a-l-carte channels) as Q1 was heavy on sports content, which may restrict net ARPU growth. While it will be in distributors’ interest to let content cost go up (pass through to subscribers) as they earn commission on this (flows down to PBT), we do not expect material rise in last-mile ARPU, given cost-conscious nature of Indian subscribers.
Revenue (net of content cost) at Rs 920 crore, Ebitda at Rs 530 crore (58% margin) and PAT at Rs (30) crore. On a comparable basis, revenue would have fallen ~8% y-o-y to Rs 1,520 crore, Ebitda (down 15%) at Rs 470 crore and PAT at Rs (80) crore. Capex guidance of Rs 650-670 crore in FY20 (Rs 200 crore in Q1); net debt reduced q-o-q to Rs 1,950 crore from Rs 2,070 crore (gross debt at Rs 2,150 crore). Aggregate licence fee provision was at Rs 2,950 crore, including Rs 1,100-crore interest.