Buy Hathway Cable; target of Rs 334: Microsec

Microsec's research report on Hathway Cable and Datacom

"Hathway Cable and Datacom, our rating underpins the company’s healthy performance in Phase I and Phase II of digitization, parentage of R Raheja group, the company’s strong geographic presence and expansion initiatives, and first mover advantage in the Cable Broadband space. However, depreciating Rs  and competition from Direct-to-Home (DTH) players impedes our optimism a bit."

"We followed comparable valuation, Enterprise Value-to-EBIDTA (EV/EBIDTA) methodology, to value Hathway. As the Cable TV and Broadband industry is turning around and engaged in implementing digitization across the nation, some of these companies have historically traded at high valuations. As a result, the three year average peer group EV / EBIDTA stood at 30.57x at the end of FY2013. However, the high multiple was attributed by Siticable, which traded at average EV / EBIDTA of 63.94x in last three years. Consequently, we took average of Den and Hathway’s historical EV / EBIDTA to progress towards our target multiple."

"In last three years, while Hathway traded at average EV / EBIDTA multiple of 14.74x, Den traded at 13.05x. After applying discount to average to these multiples, we arrived at target EV / EBIDTA multiple of 11.22x for the stock. Based on this multiple and FY2015E EBIDTA of Rs 512.79 and FY2015E net debt of Rs 798.17, we arrived at target price of Rs 334 for the stock. This represents an absolute upside of 22.2 percent, or annualized upside of 17.8 percent, from the current levels of Rs 273.25. Buy the stock," says Microsec research report.

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