2QFY18 Results Update | Sector: Media
5 December 2017
Dish TV India
BSE SENSEX
32,802
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
S&P CNX
10,118
DITV IN
1,066
85.8 / 1.3
111 / 68
7/-10/-31
481.6
35.6
2019E
34.6
11.7
2.3
2.2
258.1
7.4
34.9
17.9
36.5
10.8
CMP: INR80
TP: INR106(+31%)
Buy
Videocon merger synergies to drive earnings
EBITDA comes in above estimates:
Dish TV (DITV) delivered healthy EBITDA
growth of 7% QoQ (-18% YoY) to INR2.2b in 2QFY18, 4% above our estimate.
Revenue grew 1% QoQ to INR7.5b, supported by a 2% improvement in
subscription revenue. EBITDA margin improved 160bp QoQ, led by lower
SG&A costs, partly offset by higher transponder cost.
Improving operating environment:
EBITDA margin was also aided by the
gradually reducing churn. Net subscriber addition stood at 188,000 to reach
15.9m (+1% QoQ), while ARPUs strengthened to INR149 v/s INR148 in the
previous quarter. Improvement in monthly churn to ~0.8% v/s 1% in 1QFY18
helped reduce subscriber acquisition cost (to INR1,525/sub) and ad
expenses.
Margin-led growth ahead:
Management continued to guide for 1m annual
subscriber adds in FY18/19 and an ARPU improvement in 2HFY18, led by a)
the fading impact of discounts offered two quarters ago and b) HD
penetration. We believe the EBITDA margin should improve to 30.9% in FY18
v/s 28% in 1HFY18, driven by GST gains, better ARPUs and subscriber adds.
Subsequently, FY18 EBITDA is expected to remain flat, while FY18-20E
EBITDA CAGR should come in healthy at 18%, driven by 10% revenue growth
and a margin improvement. Management maintained FY18/19E synergy
guidance of INR1.8b/INR5.1b from the Videocon merger, which could drive
steep EBITDA growth.
Maintaining our rating and TP:
The stock is trading at an EV/EBITDA of 7.8x
on FY19E. We maintain
Buy
with a TP of INR106. We have assigned 8x
EV/EBITDA to the combined entity (Dish TV and Videocon d2h), factoring in
INR2.4b synergy gains v/s management’s guidance of INR5.1b. We believe
EBITDA growth driven by merger synergy should drive the stock price.
FY18
1Q
2Q
3QE
7,389 7,486 8,008
-5.1
-3.9
7.1
5,377 5,325 5,396
2,012 2,161 2,612
-24.0 -18.7
4.7
27.2
28.9
32.6
1,822 1,899 1,870
590
611
375
98
77
76
-302
-272
443
-162
-93
151
53.8
34.3
34.0
-139
-179
292
-135.0 -125.9 9.7
-1.9
-2.4
3.7
FY17
4QE
8,596
21.3
5,662
2,934
54.0
34.1
1,841
139
74
1,029
347
33.8
681
-340.0
7.9
FY18E
2QFY18E
7,554
-3.1
5,467
2,087
-21.4
27.6
1,870
261
87
44
15
34.0
29
-95.8
0.4
Var %
-1
-3
4
124bp
2
134
-12
NM
Financials & Valuations (INR b)
2017 2018E
Y/E Mar
30.1
31.5
Net Sales
9.7
9.7
EBITDA
1.1
0.7
PAT
1.0
0.6
EPS (INR)
-84.2
-40.0
Gr. (%)
4.6
5.2
BV/Sh (INR)
25.1
12.5
RoE (%)
18.0
11.4
RoCE (%)
78.5
130.8
P/E (x)
17.5
15.4
P/BV (x)
Estimate change
TP change
Rating change
Quarterly Performance (Consolidated)
Y/E March
Revenue
YoY Change (%)
Operating expenses
EBITDA
YoY Change (%)
EBITDA margin (%)
Depreciation
Interest
Other Income
PBT
Tax
Effective Tax Rate (%)
Net profit
YoY Change (%)
PAT margin (%)
1Q
7,786
5.7
5,139
2,647
12.3
34.0
1,649
526
115
587
189
32.2
398
-25.0
5.1
FY17
2Q
3Q
7,793 7,480
3.6
-3.0
5,151 4,985
2,642 2,495
3.6
-6.0
33.9
33.4
1,635 1,656
554
591
111
181
565
429
-136
163
(24.1) 37.9
701
267
-19.4 -61.1
9.0
3.6
4Q
7,086
-11.4
5,180
1,906
-26.9
26.9
1,728
573
104
-291
-7
2.4
-284
-105.9
-4.0
30,144 31,479
-1.5
4.4
20,415 21,760
9,729 9,719
-5.1
-0.1
32.3
30.9
6,631 7,432
2,239 1,714
475
325
1,334
898
241
243
18.1
27.0
1,093
656
-84.2 -40.0
3.6
2.1
NM
-277bp
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Aliasgar Shakir
(Aliasgar.Shakir@motilaloswal.com); +91 022 6129 1565
Hafeez Patel
(Hafeez.Patel@motilaloswal.com); +91 22 3010 2611