Accumulate Hathway Cable & Datacom; target of Rs 41: Yes Sec.

Yes Securitie's research report on Hathway Cable & Datacom

In 2QFY17, Hathway’s standalone revenue clocked growth of 19% YoY to INR 3.2 bn, mainly led by significant growth of 67% YoY in broadband revenue (to INR 1.2 bn). While standalone broadband subscriber base (including Docsis 3.0) grew to 890,000 in 2QFY17 (800,000 in 1QFY17), standalone ARPU stood at INR 740 (INR 724 in 1QFY17). During the quarter, CATV revenue grew by 18% YoY to INR 1.1 bn. CATV ARPU for Phase I |II|III stood at INR 105|90|30, while DAS III subscriber base reached 5.6 mn. Revenue from activation grew by 37% YoY to INR 202 mn, whereas revenue from placement declined by 23% YoY to INR 654 mn. Hathway’s core EBITDA stood at INR 533 mn (16.6% EBITDA margin) vs. INR 457 mn (16.9% margin) in 2QFY16. At the net level, company demonstrated loss of INR 411 mn vs. loss of INR 338 in 2QFY16.

We believe Hathway is at the cusp of ushering in the next phase of growth through (1) deeper penetration of broadband services across markets (2) expansion in ARPU and margins, with the rollout of Docsis 3.0 in new regions and (3) digital subscriber adds and ARPU expansion, given rollout of Phase III & IV of digitalization. Maintain ACCUMULATE rating on the stock. Our DCF based TP for the stock stands at INR 41.