09-10-2012, 12:08 PM
Dish TV
Re-initiating coverage with Neutral rating and TP of INR65:
We re-initiate
coverage on Dish TV (DITV), with a Neutral rating and target price of INR65. DITV
is well positioned to benefit from the ongoing digitalization further boosted by
government regulations to phase-out analogue broadcasting which should drive
22% revenue CAGR and 30% EBITDA CAGR over FY12-14E. However we are
cautious due to 1) likely increase in competitive activity as six DTH operators
and several MSOs might see digitalization as an opportunity to grab subscribers,
2) lower room to squeeze content cost percentage further down, and 3) already
high consensus expectations. Our FY13/14 EBITDA estimates are 9/6% lower than
consensus. Valuation at 9.3x FY14 EV/EBITDA (11.6x adjusting for lease rentals)
and ~USD110/subscriber is not inexpensive.
Analog broadcasting being phased out; pace of digitization to increase
The Cable Television Networks (Regulation) Amendment Act 2011 has spelled out a
sunset date for analog transmission in India. The Act proposes complete digitization
of the cable network throughout India by December 2014. The deadline for the first
phase (metros) is June 2012. While execution challenges remain, we believe the
pace of digitization would increase due to the government push. A significant
proportion of the total analog subscriber base of ~80m is likely to prefer DTH v/s
digital cable, given superior execution capabilities, access to funding, and experience
of subscriber management available with the DTH industry.
Indian pay TV subscription story strong, led by increasing digitization
Digitization continues to be a dominant theme for Indian broadcasting and is led
primarily by DTH. We expect DTH subscriber base to exceed analog subscriber base by
CY13, which will be a tipping point, as bargaining power of LCOs (local cable operators)
will significantly reduce under the new regime. A push by the government in the
form of sunset for analog broadcasting by end of 2014 will further accelerate the
digitization process. India's household (HH) TV penetration is estimated at ~60%,
implying 140m-150m TV HHs. Of these, ~80% or ~120 HHs have pay TV (cable and
satellite; C&S) connections. Analog cable subscriber base is estimated at 70m-75m,
digital cable at 5m-7m, and DTH at 40m-45m. We expect addition of ~8m C&S HHs
every year, largely on the DTH platform.
Re-initiating coverage with Neutral rating and TP of INR65:
We re-initiate
coverage on Dish TV (DITV), with a Neutral rating and target price of INR65. DITV
is well positioned to benefit from the ongoing digitalization further boosted by
government regulations to phase-out analogue broadcasting which should drive
22% revenue CAGR and 30% EBITDA CAGR over FY12-14E. However we are
cautious due to 1) likely increase in competitive activity as six DTH operators
and several MSOs might see digitalization as an opportunity to grab subscribers,
2) lower room to squeeze content cost percentage further down, and 3) already
high consensus expectations. Our FY13/14 EBITDA estimates are 9/6% lower than
consensus. Valuation at 9.3x FY14 EV/EBITDA (11.6x adjusting for lease rentals)
and ~USD110/subscriber is not inexpensive.
Analog broadcasting being phased out; pace of digitization to increase
The Cable Television Networks (Regulation) Amendment Act 2011 has spelled out a
sunset date for analog transmission in India. The Act proposes complete digitization
of the cable network throughout India by December 2014. The deadline for the first
phase (metros) is June 2012. While execution challenges remain, we believe the
pace of digitization would increase due to the government push. A significant
proportion of the total analog subscriber base of ~80m is likely to prefer DTH v/s
digital cable, given superior execution capabilities, access to funding, and experience
of subscriber management available with the DTH industry.
Indian pay TV subscription story strong, led by increasing digitization
Digitization continues to be a dominant theme for Indian broadcasting and is led
primarily by DTH. We expect DTH subscriber base to exceed analog subscriber base by
CY13, which will be a tipping point, as bargaining power of LCOs (local cable operators)
will significantly reduce under the new regime. A push by the government in the
form of sunset for analog broadcasting by end of 2014 will further accelerate the
digitization process. India's household (HH) TV penetration is estimated at ~60%,
implying 140m-150m TV HHs. Of these, ~80% or ~120 HHs have pay TV (cable and
satellite; C&S) connections. Analog cable subscriber base is estimated at 70m-75m,
digital cable at 5m-7m, and DTH at 40m-45m. We expect addition of ~8m C&S HHs
every year, largely on the DTH platform.