Hold Dish TV; target of Rs 79: Emkay

“Dish TV standalone revenue was in-line at Rs5.6bn with subscription revenue growth of 4.6% qoq to Rs4.9bn. Lease rental revenue stood at Rs380mn v/s 430mn in Q2FY13, continued decline was due to change in accounting policy. Other revenues grew from Rs175mn to Rs250mn. EBITDA during the quarter declined 11.5% qoq to Rs1.37bn. Decline is attributable to higher content cost (+14.5% qoq) pertaining to Media Pro deal.”

“EBITDA would continue to remain muted in Q4FY13E due to high content cost admin expenses increased 13.4% qoq due to higher spend towards digitization. EBITDA margin at 24.7% declined 450bps qoq. Adj. net loss for the quarter was at Rs 448mn v/s Rs213mn in Q2FY13. Depreciation during the quarter stood at Rs1.7bn v/s Rs1.5bn in Q2FY13, leading to higher losses. Other income included forex gain of Rs60mn, leading to lower losses. Dish TV reported -ve FCF of Rs160mn v/s +ve Rs350mn Q2FY13, due to higher subscriber addition. Company has generated Rs600mn + ve FCF in 9MFY13.”

“ARPU growth for the company has come under pressure due to increased competition, down-trading in packages and leakage in renewals. We believe subscriber addition would continue with digitization while ARPU growth to remain muted in near term. Further, higher depreciation going forward led to increase in estimated losses. At CMP of Rs74 stock trades at 14.8x/11.8x EV/EBITDA of FY13E/FY14E. Downgrade to hold with target price of Rs79,” says Emkay Global Financial Services research report.

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