Reduce Den Networks; target of Rs 127: Emkay

Emkay Global Financial Services' report on Den NetworksConsolidated revenue was Rs2656mn (-11% yoy and -1.7% qoq) and EBITDA loss stood at Rs47mn, impacted by muted revenues and 33% qoq increase in placement cost. Net loss stood at Rs519mn vs Rs621mn in Q4FY15 Net subscription revenue of Rs1190mn grew 5.3% sequentially. Weak EBITDA in cable business and EBITDA loss of Rs180mn in broadband weighed on consolidated operating performanceImplementation of package-wise billing is expected to remain on a slow pace and investments in broadband will continue to weigh on operating performanceDelay in implementation of package-wise billing, rising content cost and investment in broadband continues to impact operating performance. We cut EBITDA estimates by 48%/2% for FY16/17E. Maintain REDUCE with revised target price of Rs 127Outlook"We continue to maintain cautious stance on cable distribution companies, given continued delays in implementation of package-wise billing and rising content cost. This highlights that MSO’s do not have negotiating power against both LCO’s (to extract higher revenue share) and Broadcasters (restrict content cost increase). Further, investments in broadband has also weighed on operating performance. In our view, weak operating performance would continue in medium term as cable business operating performance would not improve until package-wise billing starts across digital subscribers. Investments in broadband and loss in soccer business would further weigh in medium term", says Emkay Global Financial Services research report.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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