Buy Dish TV India; target of Rs 96.80: Microsec

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Buy Dish TV India; target of Rs 96.80: Microsec

Microsec is bullish on Dish TV India and has recommended buy rating on the stock with a target of Rs 96.80 in its September 26, 2011 research report.

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Microsec is bullish on Dish TV India and has recommended buy rating on the stock with a target of Rs 96.80 in its September 26, 2011 research report.

"Dish TV India Limited (Dish) announced its Q1 FY2012 results on 20 July 2011. The company's revenues came in line with our as well as Bloomberg consensus estimates. Additionally, the company positively surprised on the bottom line front with losses coming considerably below expectations. Lower than anticipated selling and distribution expenses remained the key contributor for paring losses."

"As expected, the subscriber additions cooled down a bit during Q1 FY2012 post ICC Cricket World Cup. Additions of HD users also got impacted by the same phenomenon. Although Dish added the lowest users in last four quarters, its net adds came above Q1 FY2011 levels. The company added 0.60 Mn new users in Q1 2011. Additionally, Dish introduced five new HD channels during the quarter leading the total HD portfolio to 40 channels. Moreover, it added new channels for Telugu, Kannada, Oriya and North Eastern viewers on SD spectrum, leading total count of these channels to 20 Telugu, 12 Kannada, 8 Oriya and 8 North Eastern channels. At the end of the quarter the company was offering 320 channels and services on its platform including 22 audio and 40 HD channels. Dish posted ARPU, higher than or equal to `150 levels for consecutive quarters in Q2 FY2011, for the first time since Q2 FY2009. The following exhibits reflect the company's ARPU and subscriber base for last five quarters."

"Dish TV India Limited (Dish) announced its Q1 FY2012 results on 20 July 2011. The company's revenues came in line with our as well as Bloomberg consensus estimates. Additionally, the company positively surprised on the bottom line front with losses coming considerably below expectations. Lower than anticipated selling and distribution expenses remained the key contributor for paring losses. We continue to follow Discounted Cash Flow (DCF) Methodology to value the stock of Dish. To arrive at Weighted Average Cost of Capital (WACC), we used Capital Asset Pricing Model (CAPM) for calculating cost of Equity. Furthermore, we raised the long term Cost of Debt for the company, from 7.0% earlier, led by recent consecutive hikes in interest rates by Reserve Bank of India. Based on Risk Free Rate of 8.30%, Market Risk Premium of 5.52%, and Beta of 1.18x, the company's cost of equity stood at 14.81%. For debt, we assigned a post tax cost of 8.50%. Coupled with these costs and desired Debt-to-Equity ratio of 1.5x, we arrived at WACC of 11.03%. This is higher than our previous calculated WACC of 9.89%. Furthermore, we assumed a terminal growth rate of 2.5% for the stock post FY2017E. With this, we arrived at a target price of `96.80 for Dish, representing an upside of 24.8% over the current market price of `77.55," says Microsec research report.

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