Hathway Cable rating | Hold — Standalone performance was weak

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Published: July 22, 2019 1:12:36 AM

However, the management has not disclosed the cable business ARPUs for Q1FY20 similar to their stance in the previous quarter.

Our last recommendation was ‘HOLD/SP’ with TP of Rs 33. At CMP, the stock is trading at 11.4x/10.4x FY18/19 EV/Ebitda.

Hathway Cable & Datacom’s (Hathway’s) standalone Q1FY20 performance continued to remain weak. While revenue growth remained muted, in line with our expectation, Ebitda declined ~10% q-o-q and Ebitda margin contracted 340bps q-o-q due to higher content cost and employee expenses. Key highlights: (i) broadband ARPU declined 2% to Rs 650; (ii) marginal rise in subscriber base to 0.84 mn (30k q-o-q net addition); and (iii) reported profit jumped to Rs 195 mn on Rs 577 mn other income. We are discontinuing our coverage on the stock. Our last rating was ‘HOLD’ with target price of Rs 33.

Pressure on ARPU and slow subscriber growth key concern: Hathway’s broadband revenue increased 1% q-o-q and ~3% y-o-y, largely due to the ARPU downtrend – Rs 650 in Q1FY20 (Rs 662 in Q4FY19) and weak growth in net subscriber addition—subscriber count stood at 0.84 mn in Q1FY20, as against 0.81 mn in FY19. The broadband business reported PAT of Rs 195 mn bolstered by other income of Rs 577 mn. Post the open offer, Reliance holds 72% stake in Hathway. Public shareholding fell from 54.5% to 5.91% after the open offer.
NTO uplifts cable business performance: Subscription revenue for the cable business increased 28% q-o-q and 38% y-o-y, supported by revision in pay TV channel bouquet pricing and pick-up in subscription demand in light of the cricketing season.

However, the management has not disclosed the cable business ARPUs for Q1FY20 similar to their stance in the previous quarter.
Outlook and valuation: We are discontinuing coverage on the stock. Our last recommendation was ‘HOLD/SP’ with TP of Rs 33. At CMP, the stock is trading at 11.4x/10.4x FY18/19 EV/Ebitda.

 

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