Dish TV - Standalone Q2 FY2014 Results - First Cut
Rajesh Desai
Dear Sir/Madam,
Dish TV India Ltd (Dish TV) announced its standalone Q2 FY2014 results on 23 October 2013. The company’s revenues came in line with our as well as Bloomberg Consensus Estimates. However, Dish TV reported lower than expected losses during the quarter. A glimpse of the same is as follows:
Dish TV’s top line increased 2.5% q-o-q to `592.6 Crores while its losses shrunk 47.3% sequentially to `16.0 Crores in Q2 FY2014. Increase in the company’s revenues was mainly driven by a 1.7% q-o-q expansion in subscription revenues to `537 Crores. This growth, in turn, was led by addition of 164 thousand new subscribers and Average Revenue Per User (ARPU) standing flat at `165. We expected Dish TV to report ARPU of `167 and subscriber addition of 170 thousands. Below estimated performance on these parameters kept the company’s top line lower than our expectations.
However, despite a lower than expected top line, Dish TV reported a significant rebound in its EBIDTA margins. Led by reduction in programming and marketing costs, the company’s EBIDTA margins expanded 246 basis points (bps) q-o-q to 25.0% in Q2 FY2014. Better performance at EBIDTA level also trickled down in its bottom line. Consequently, Dish TV’s net losses reduced 20.4% q-o-q to `16.0 Crores during the quarter. Significant improvement in EBIDTA also helped the company to report free cash flows of `66.7 Crores in Q2 FY2014 compared with free cash flows of `48.4 Crores, reported a quarter earlier. With continued improvement in its free cash flows, Dish TV was able to pay back `235 Crores of Debt during H1 FY2014. Going forward, the company intends to repay additional debt of equivalent to $90 Mn in H2 FY2014E.
Apart from prospected repayment of debt, Dish TV’s bottom line performance is likely to get support from initiatives such as acquisition of additional transponder capacity and the ongoing digitization wave. Furthermore, to cater to the growth through internet space, Dish TV, in collaboration with Ditto TV, launched an exclusive Over-the-top (OTT) application for its users. Under this, the subscribers can watch live TV, Catch up TV and Movies on the go by paying an additional package based fee of `129 or `49.
Considering Dish TV’s better than expected profits, its growing free cash flows, ability to cater to the digitization opportunity and innovative steps such as OTT app, we continue to have a positive view on the stock. With this, we continue to rate the stock a STRONG BUY with a target price of `96.80.
Regards,
Team Microsec Research
Microsec Capital Limited
Tel: 91 33 30512100
Fax: 91 33 30512020
CA. Rajesh Desai