1、,Company report,Telecoms, Media & TechnologyMediaEquity India,abcGlobal Research,Dish TV India Ltd (DITV IN),Underweight (V)Targetprice (INR) 62.00Share price (INR) 77.40Potential return (%) -19.9Note: Potential return equals the percentagedifference between the current share price and,UW(V): Upside
2、s from Phase 2 are capped for DTH 3Q FY13 below estimates as margins decline by 450bp We dont see improvement in margins; upsides from Phase 2are limited, in our view,the target priceMar,2012 a 2013 e,2014 e, UW(V) with TP of INR62,HSBC EPS,-1.49,-0.64,-1.19,HSBC PE,PerformanceAbsolute (%)Relative (
3、%),1M1.8-2.6,3M2.2-5.0,12M29.37.7,Dish TV reported poor set of 2Q numbers with EBITDA margins declining by 450bp on aq-o-q basis. Total costs increased by 11% this quarter, highest increase in the last six quarters.,Note: (V) = volatile (please see disclosure appendix)22 January 2013Rajiv Sharma*Ana
4、lystHSBC Securities and Capital Markets(India) Private Limited+91 22 22681239rajivsharmahsbc.co.inTucker Grinnan*Regional Head of Telecoms ResearchThe Hongkong and Shanghai BankingCorporation Limited+852 2822 .hkView HSBC Global Research at:http:/*Employed by a non-US affiliate ofHSBC Securities (US
5、A) Inc, and is notregistered/qualified pursuant to FINRAregulationsIssuer of HSBC Securities andreport: Capital Markets (India)Private LimitedDisclaimer &DisclosuresThis report must be readwith the disclosures andthe analyst certifications inthe Disclosure appendix,and with the Disclaimer,which form
6、s part of it,Subscriber net additions were c10% better than our estimates; however, ARPU improvementwas marginal and below estimates. Revenue growth at 4.5% was marginally better thanprevious quarter, because of higher subscriber net additions. We expect the margin pressures tosustain and believe be
7、nefits from Digital Addressable System (DAS) for DTH sector overallare more back ended and we see DTH benefiting only from Phase 3 onwards.Phase 2 not for DTH: Our channel checks suggest that cable operators have a robustpresence in Phase 2 cities (Refer Figure 7) and we believe share of DTH is unli
8、kely toexceed 30% in DAS Phase 2. That said we expect Phase 2 to be delayed at least by aquarter. From the distribution industry perspective, investors are focussed on the revenueflow from the two metros in Phase 1. We expect the cable TV ARPUs to improve by 25%at least in the Phase 1 markets.Outloo
9、k on Dish TV: We expect c5% jump in Dish TV subscriber net additions in FY14e overFY13e and are modeling for 7% improvement in ARPU. However, we expect margins to beunder pressure until the completion of Phase 2 at the least. We believe that post Phase 2broadcasters are likely to move from fixed fee
10、 contracts to subscriber linked contracts. Such amove, in our view, will be relatively negative for the DTH versus cable TV given the capacityconstraints with the DTH platform. However, we note because of its co-locations arrangementswith Doordarshan (NR), Dish TV is relatively better placed than ot
11、her DTH players.Valuation and risk: We remain UW(V) on Dish TV India and retain our TP of INR62. Wevalue the company using DCF analysis, assuming a WACC of 13% (COE at c14% and Cost ofDebt at 11%). We expect the consensus to cut estimates going forward. Key upside riskswould be: (a) higher than esti
12、mated increase in cable TV ARPUs, which, in our view, willallow the DTH sector to pursue another tariff hikes (b) slow and a gradual rollout of DAS inPhase 2, this, in our view, may allow the company to fare better on margins (c) consolidationwithin the DTH space, and (d) higher than estimated churn
13、 on the cable TV platform.Index BOMBAY SE IDX Enterprise value (INRm) 88,842Index level 20,102 Free float (%) 100RIC DSTV.BO Market cap (USDm) 1,532Bloomberg DITV IN Market cap (INRm) 82,405Source: HSBC Source: HSBC,Dish TV India Ltd (DITV IN)Media22 January 2013Financials & valuationFinancial state
14、ments,Valuation data,abc,Year to,03/2012a,03/2013e,03/2014e,03/2015e,Year to,03/2012a,03/2013e,03/2014e,03/2015e,Profit & loss summary (INRm),EV/sales,4.6,4.0,3.3,2.9,RevenueEBITDADepreciation & amortisationOperating profit/EBITNet interestPBT,19,5784,984-5,180-196-1,971-1,589,21,9746,060-6,578-518-
15、1,549-1,702,26,7607,415-7,981-566-1,429-1,631,30,7699,000-8,805195-1,257-688,EV/EBITDAEV/ICPE*P/Book valueFCF yield (%)Dividend yield (%),18.212.2-5.60.0,14.716.1-1.80.0,12.021.8-1.50.0,9.923.1-1.10.0,HSBC PBTTaxationNet profitHSBC net profit,-1,5890-1,589-1,589,-6760-1,702-676,-1,2650-1,631-1,265,-
16、6880-688-688,Note: * = Based on HSBC EPS (fully diluted)Price relative,Cash flow summary (INRm)Cash flow from operationsCapexCash flow from investmentDividendsChange in net debtFCF equity,3,388-6,553-4,99502,645-4,517,5,023-6,093-6,2860-1,494-1,434,6,388-7,255-7,2550-178-1,232,8,061-8,541-8,5410480-
17、853,1161069686766656,1161069686766656,Balance sheet summary (INRm)Intangible fixed assets 43Tangible fixed assets 18,044Current assets6,488Cash & others3,919Total assets26,340Operating liabilities13,231Gross debt13,942Net debt10,023Shareholders funds-939Invested capital7,425,4018,3878,5486,00229,068
18、15,46614,5318,529-1,0515,507,17816,8448,7486,00227,86315,70414,3538,351-2,3164,065,33216,4268,9296,00227,77915,82814,8338,831-3,0033,856,462011Dish Tv India LtdSource: HSBCNote: price at close of 21 Jan 2013,2012 2013Rel to BOMBAY SE SENSITIVE INDEX,462014,Ratio, growth and per share analysis,Year t
19、o,03/2012a,03/2013e,03/2014e,03/2015e,Y-o-y % change,RevenueEBITDA,36.3109.4,12.221.6,21.822.4,15.021.4,Operating profitPBTHSBC EPSRatios (%),Revenue/IC (x)ROICROEROAEBITDA marginOperating profit marginEBITDA/net interest (x)Net debt/equityNet debt/EBITDA (x)CF from operations/net debt,3.0-3.0558.81
20、.425.5-1.02.50.02.033.8,3.4-8.067.9-0.627.6-2.43.90.01.458.9,5.6-11.875.1-0.727.7-2.15.20.01.176.5,7.84.925.92.029.30.67.20.01.091.3,Per share data (INR),EPS reported (fully diluted)HSBC EPS (fully diluted)DPSBook value,-1.49-1.490.00-0.88,-1.60-0.640.00-0.99,-1.53-1.190.00-2.18,-0.65-0.650.00-2.82,
21、2,Dish TV India Ltd (DITV IN)Media22 January 2013Figure 1: EBITDA margin under pressure in 3Q FY13,abc,35%30%25%,25%,24%,27%,30%,29%,25%,20%15%10%5%0%,Sep-11,Dec-11,Mar-12,Jun-12,Sep-12,Dec-12,EBITDA marginSource: Company data, HSBC,Key highlights from theearnings call HD accounts for 5% of revenues
22、. Thecompany is focused on value share and hasc37% share in the HD segment. EBITDA margins declined because ofinvestments in digitisation. Some of thesecosts are fixed and some variable. Fixed costsin markets like Kolkata and Chennai have notbeen absorbed given the delays in DAS. Free cash flow for
23、the first nine months wasat INR5bn and FCF for this quarter was atINR1.6bn. Management of the view that DAS Phase 2will be gradual and as such there will not be,any steep decline in margins. We agree withthe management estimates and expect at leasta quarter delays in Phase 2. Howevermanagement is of
24、 the view that DTH sectorwill have a 45% share in Phase 2, we differand expect it c30%. Total inventory suggested by the companyat 2.1, which is c80% of the next four quarterestimated subscriber net additions. To sumup, there is no funding need for the nexttwo quarters at least, assuming a gradualPh
25、ase 2 rollout. Subscriber ARPU would have beencINR164-165 had it not been for the highergross additions this quarter as permanagement estimates.,Figure 2: ARPU growth has been slower than estimates, expect it to improve in 1QFY14e,200,152,152,151,156,159,160,150100500,Sep-11,Dec-11,Mar-12,Jun-12,Sep
26、-12,Dec-12,ARPU (INR)Source: Company data3,INRbn,Dish TV India Ltd (DITV IN)Media22 January 2013Figure 3: Gross additions jumped this quarter owing to DAS phase1 implementation,abc,1000800,740,829,600,575,415,504,477,4002000,Sep-11,Dec-11,Mar-12,Jun-12,Sep-12,Dec-12,Subscribers gross additions (000s
27、)Source: Company data,Valuation and risksWe retain our Underweight (V) rating on Dish TVIndia. We reduce our FY14e EBITDA estimatesby 8%, largely driven by weak margins in 3Q. Wehave cut our F14e revenue estimates by 5% aswell, given the slower than improvement inARPU despite the recent tariff hikes
28、. That said,we expect ARPUs to improve in the medium tolonger term.We retain our DCF-based target price of INR62.For our DCF analysis, we assume WACC of 13%(COE at c14% and Cost of Debt at 11%) as wehave maintained our medium to longer termestimates. The near term decline in marginassumption is bein
29、g compensated by marginalFigure 4: Dish TV India EV/EBITDA bands1009080706050,improvement in ARPUs and as such, there is nochange to our target price.Under our research model, for stocks with avolatility indicator, the Neutral band is 10pptsabove and below the hurdle rate for India stocksof 11%. Our
30、 target price of INR62 implies anegative potential return of -19.9%, below theNeutral band; therefore, we are reiterating ourUnderweight (V) rating. Potential return equalsthe percentage difference between the currentshare price and the target price, including theforecast dividend yield when indicat
31、ed.Key upside risks include: further delay in DASrollout and sector consolidation in the DTH space.,Jan-12,Apr-12,EV,8x,Jul-12,10x,12x,Oct-12,Jan-13,Source: Thomson Reuters Datastream4,Dish TV India Ltd (DITV IN)Media22 January 2013Figure 5: Change in estimates,abc,INRmSalesNewOldChangeEBITDANewOldC
32、hangeNet profitNewOldChangeSource: HSBC estimatesFigure 6: 3QFY13 results were below our estimates,FY 14e26,76028,129-5%7,4158,067-8%-1,265151-936%,FY15e30,76931,539-2%9,0009,084-1%-688442-255%,( Figs in INR m Actual,HSBC Estimates Actual vs. HSBC,2QFY13,3QFY12,QoQ,YoY,unlessspecified),RevenueEBITDA
33、EBITDA Margin,5,5781,37724.7%,5,9081,60827.2%,-6%-14%-3%,5,3361,55729.2%,4,9051,17824.0%,4.5%-11.5%-4.5%,14%17%0.7%,(%),Net Profit,-449,-199,nm,551,-172,nm,nm,Source: Company data, HSBC5,1,2,3,4,5,1,2,3,4,5,6,7,8,9,33,Dish TV India Ltd (DITV IN)Media22 January 2013Figure 7: Multiple cable operators
34、are present in the Phase2 cities. DTH will find it tough in our view,abc,Serial no Cities,Key cable operators present,AgraAhmedabad,DenDigital,Hathway,SitiCable,InDigital,Allahabad,DenDigital,Hathway,SitiCable,AmritsarAurangabad,Hathway,SitiCable,BangaloreBhopalChandigrah,DenDigital,HathwayHathwayHa
35、thway,SitiCableSitiCableSitiCable,InDigital,Coimbatore,FaridabadGhaziabadHowrah,DenDigitalDenDigital,Hathway,SitiCable,InDigital,10,HyderabadIndoreJabalpur,DenDigital,HathwayHathwayHathway,SitiCableSitiCable,InDigitalInDigital,1112,JaipurJodhpur,DenDigitalDenDigital,Hathway,SitiCable,131415,Kalyan -
36、 DombiviliKanpurLucknow,DenDigitalDenDigitalDenDigital,HathwayHathwayHathway,SitiCableSitiCable,InDigital,1617,LudhianaMeerut,DenDigital,SitiCable,1819,MysoreNagpur,DenDigital,Hathway,InDigitalInDigital,2021,NasikNavi Mumbai,DenDigitalDenDigital,HathwayHathway,SitiCableSitiCable,InDigitalInDigital,2
37、2,Patna,SitiCable,23,Pimpri - Chinchwad,Hathway,InDigital,2425262728,PuneRajkotRanchiSolapurSrinagar,DenDigitalDenDigitalSitiCableIndependent cable,HathwayHathway,InDigital,operators,2930,SuratThane,HathwayHathway,InDigitalInDigital,3132,VadodraVaranasi,DenDigitalDenDigital,Hathway,SitiCable,InDigit
38、al,VisakhapatnamSource: HSBC analysis6,Independent cable operators,Dish TV India Ltd (DITV IN)Media,abc,22 January 2013Disclosure appendixAnalyst CertificationThe following analyst(s), economist(s), and/or strategist(s) who is(are) primarily responsible for this report, certifies(y) that theopinion(
39、s) on the subject security(ies) or issuer(s) and/or any other views or forecasts expressed herein accurately reflect theirpersonal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specificrecommendation(s) or views contained in this research rep
40、ort: Rajiv SharmaImportant disclosuresStock ratings and basis for financial analysisHSBC believes that investors utilise various disciplines and investment horizons when making investment decisions, whichdepend largely on individual circumstances such as the investors existing holdings, risk toleran
41、ce and other considerations.Given these differences, HSBC has two principal aims in its equity research: 1) to identify long-term investment opportunitiesbased on particular themes or ideas that may affect the future earnings or cash flows of companies on a 12 month time horizon;and 2) from time to
42、time to identify short-term investment opportunities that are derived from fundamental, quantitative,technical or event-driven techniques on a 0-3 month time horizon and which may differ from our long-term investment rating.HSBC has assigned ratings for its long-term investment opportunities as desc
43、ribed below.This report addresses only the long-term investment opportunities of the companies referred to in the report. As and when HSBCpublishes a short-term trading idea the stocks to which these relate are identified on the website at of these short-term investment opportunities can be found u
44、nder the Reports section of this website.HSBC believes an investors decision to buy or sell a stock should depend on individual circumstances such as the investorsexisting holdings and other considerations. Different securities firms use a variety of ratings terms as well as different ratingsystems
45、to describe their recommendations. Investors should carefully read the definitions of the ratings used in each researchreport. In addition, because research reports contain more complete information concerning the analysts views, investorsshould carefully read the entire research report and should n
46、ot infer its contents from the rating. In any case, ratings should notbe used or relied on in isolation as investment advice.Rating definitions for long-term investment opportunitiesStock ratingsHSBC assigns ratings to its stocks in this sector on the following basis:For each stock we set a required
47、 rate of return calculated from the cost of equity for that stocks domestic or, as appropriate,regional market established by our strategy team. The price target for a stock represents the value the analyst expects the stockto reach over our performance horizon. The performance horizon is 12 months.
48、 For a stock to be classified as Overweight, thepotential return, which equals the percentage difference between the current share price and the target price, including theforecast dividend yield when indicated, must exceed the required return by at least 5 percentage points over the next 12 months(
49、or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight, the stock must beexpected to underperform its required return by at least 5 percentage points over the next 12 months (or 10 percentage pointsfor a stock classified as Volatile*). Stocks betwee
50、n these bands are classified as Neutral.Our ratings are re-calibrated against these bands at the time of any material change (initiation of coverage, change of volatilitystatus or change in price target). Notwithstanding this, and although ratings are subject to ongoing management review,expected returns will be permitted to move outside the bands as a result of normal share price fluctuations without necessarilytriggering a rating change.7,
