Buy Den Networks, Dish TV, Hathway Cable: PINC Research

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Buy Den Networks, Dish TV, Hathway Cable: PINC Research

PINC Research has come out with its sector report on cable & satellite industry. The research firm has initiated coverage on the sector, with a buy recommendation on Hathway Cable (TP Rs 151, +36%), Dish TV (TP Rs 77, +26%) and Den Networks(TP Rs 64, +33%) in its December 26, 2011 research report.

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PINC Research has come out with its sector report on cable & satellite industry. The research firm has initiated coverage on the sector, with a buy recommendation on Hathway Cable (TP Rs 151, +36%), Dish TV (TP Rs 77, +26%) and  Den Networks (TP Rs 64, +33%) in its December 26, 2011 research report.

"The Indian Cable & Satellite(C&S) industry, the third largest in the world, with 136mn C&S homes is all set for a revolution as the long-expected 'digitisation' becomes a reality. Currently there are 41mn DTH homes and 6mn Digital cable homes (35% penetration in C&S homes). Going forward digital subscriber base is expected to rise from 47mn to 83mn by 2015, increasing at 21%CAGR (2012E-2015E). An industry of Rs270bn will no longer operate under obsolete analog distribution business post digitisation. The long standing local cable operator (LCO) 'underreporting' issue will get resolved with the gradual roll out of digitisation as per the sunset clause. Aggressive marketing and promotional offers by DTH players adds to the growth factor of the industry."

"C&S industry is set to expand to 166mn with 64mn DTH and 20mn digital cable gross subscribers by 2015E. Aggressive subscriber acquisitions by the well funded six DTH players have kept the digitisation momentum alive. Now with compulsory digitisation MSOs and LCOs are left with 'no choice' in the face of increasing threat from DTH. We believe with Government-mandated digitisation, the well funded national MSOs and DTH players are all set to capture the opportunity."

"Currently the C&S industry is largely run under the outdated analog mode of distribution which has resulted in a highly fragmented value chain and allowed last mile operator to corner ~80% of the subscription revenue. With compulsory digitisation, economic retention will be the crucial driver in value creation. Curbing of revenue leakages will be the main growth factor for C&S industry to register 10% CAGR over 2012E-15E. Out of which we expect 47% CAGR in digital cable revenue over 2012E-15E.Digital cable players will benefit with increased portion of retained gains of compulsory declaration, which would drive a 3x rise in revenues. DTH subscription revenue is estimated to show 22% CAGR during 2012E-15E. Digitisation is bound to reduce the incidence of under-reporting - the bane of the Indian C&S industry. High operating leverage business model will be the key driver for organised cable players and DTH operators in magnifying their operating margins. We see major players in DTH segment and organized MSOs to breakeven by 2013."

"Structural change in cable distribution and DTH ramp up makes us positive on the Indian C&S Industry and we initiate coverage on the sector, with a 'BUY' recommendation on Den Networks, Dish TV and Hathway Cable," says PINC Research report.

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To read the full report click on the attachment