Is Dish TV a good contrarian bet post poor Q1 earnings?

 Dish TV shares hit a three year low last week on poor Q1FY14 results. The company posted a higher-than-expected net loss of Rs 30.4 crore in the first quarter. Here's why three brokerages- Macquarie, CLSA and Jeffries' have contrarian bets on the stock.

The Bulls views Macquarie has maintained an OUTPERFORM on the stock with a target of Rs 75, while CLSA has given a BUY on the stock with Rs 70 as its target. The brokerages are saying that the Q1 Average Revenue Per User (ARPU), which was seen at around Rs 165 versus Rs 157 on a sequential basis is a net positive. Apart from that, the free cash flow over here which is around Rs 44 crore odd this quarter against a full year generation of around Rs 65 crore is additionally a good number which is a positive indicator. They also see that there were cuts which are being witnessed in the stock due to the performance which has been disappointing on the quarter again and again, but still there have been maintenance of BUY over here and as such there have been issues in terms of the high content cost, the depreciating rupee and also the larger competitions which have been hitting the margins. In most of the cases the ARPUs have been witnessing a positive trajectory on all the quarter basis and the subscriber addition also is seeing some amount of improvement. Additionally, the management also intends to halve down the debt in FY14 through the internal accrual of cash which also is an indicator which states that there will not be any addition of dilution which will be required going ahead as such for Dish TV. The Bears view The bearish view seems to be getting it right. Jefferies does have an UNDERPERFORM on the stock with a price target of Rs 47 and that stock is down nearly around 3 percent odd. The margins have fallen. What Jefferies is saying that they have an UNDERPERFORM price target at Rs 47 that margin contraction is one of the reasons, because it is 400 bps below their expectations. Also Phase II digitalisation did not really bring in the desired results. They have also gone onto say that the gross additions were only 350,000 in this particular quarter and going ahead focusing on premium segment would put further pressure on these additions. Lastly, the rupee depreciation is likely to put further pressure on their margins and that is why we are seeing that stock down and Jefferies does believe that. That stock has more in store on the downside.