Dish TV reports maiden net profit in Q4FY15 on strong subscriber addition and higher ARPU

1. 1
Entertainment - Electronic Media
Dish TV
Sensex: 27804 CMP:INR105
~3 mn net subscriber addition over FY16-17E
Net subscriber addition for Dish TV is expected to be healthy in
FY16-17E due to implementation of phase 3 & 4 of Digital
Addressable System (DAS). In phase 3 & 4, ~70 mn analog
subscribers will be digitized and DTH players are expected to
garner ~60% of the new digital subscriber. Assuming that DishTV
maintains its market share at 27% of gross additions and annual
churn rate of ~10%, over next two years it will add ~5.5 mn gross
and ~3 mn net subscribers.
ARPU to improve by ~6% in FY16E on back of price hike
Dish TV took two rounds of price hikes in FY15 (~4-6% in Aug'14 &
~4-8% in Feb'15) and also implemented differential pricing in
phase 1 & 2 cities, ~35% of its subscriber base (increase of INR10/
month across packages). This should help ARPU to improve by
~6% in FY16E.
Moderate increase in content cost
Dish TV has locked in its content agreement with most of the
broadcasters till Sept'16 and expects low single digit increase in
content cost for FY16E. Further, DTH though accounts for only 28%
of the distribution channel, it contributes ~60% of the
broadcaster's revenue. Hence, there is scope for rationalization
in content cost going forward.
Margin improvement led by operating leverage
EBIDTA margin should improve going forward due to higher ARPU,
moderate increase in content cost and lower license fee once TRAI
recommendation of 8% of adjusted gross revenue is implemented.
This will lower effective license fee to ~7.5% from current 10% of
gross revenue. EBIDTA margin, post implementation GST and TRAI
recommendation on license fee, should improve to ~35%. Dish TV
currently pays cumulative tax of ~22% (Service tax - 14% and
Entertainment tax -~8%) on its services. Post GST, this should come
down below 20%.
June 24, 2015 Visit Note
Reduction in debt to aid profitability
Dish TV is expected to generate free cash flow of >INR 5000 mn in
next two years, which should help it to reduce its INR 8500 mn
long term debt at the end of FY15 and improve profitability.
How real is the threat from broadband?
With interactive revolution, DTH certainly has a disadvantage as
it is a one way technology and the interactivity that the viewers
want works a lot better with cable or broadband. However, not
everyone has access to a good cable or high speed bandwidth.
Secondly, cost of client acquisition is exorbitant in case of
broadband (~INR 4000/client). On the other hand, DTH is extremely
distributable over vast distances and so for a lot of people DTH
will still be the only way that they can access content. In terms of
audience, DTH continues to expand in India as well as globally. In
India its share is expected to increase from ~27% in 2014E to
~40% in 2019P. Globally its share is expected to increase from
23% in 2014E to 26% in 2020P.
Outlook & Valuation
Strong subscriber addition, increase in ARPU and lower content
cost led Dish TV to report its first net profit in Q4FY15. We believe
that same factors will continue to play in FY16E leading to revenue
growth of ~18% (12% volume growth and 6% price growth) and
EBIDTA margin improvement of 400 bps to 30% aided by lower
content cost. On threat from broadband, we believe that as long
as people continue to prefer linear viewing compared to on-
demand viewing, DTH/cable will continue to grow. For now,
combination of commercial might (60% of broadcaster's
subscription revenue), vast universal broadcast footprints and
commitment to ever improving image quality (4K content), means
that DTH service is here to stay. At CMP of INR 105,it is trading at
16.2x FY15 EV/EBIDTA.
Shareholding % Mar-15
Promoters 64.46
FIIs 24.09
DIIs 3.41
Others 8.04
Relative Price Performance
Key Data
BSE Code 532839
NSE Code DISHTV
Bloomberg Code DITV IN
Reuters Code DSTV.BO
Shares Outstanding (mn) 1065.7
Face Value 1
Mcap (INR bn) 112.8
52 Week H/L 117.25/52.25
2W Avg. Qty.NSE 15892163
Free Float (INR Bn) 40.08
Beta 1.1
Y/E (INR mn) FY12 FY13 FY14 FY15
Net Sales 19579 21668 25090 27816
Growth (%) 36.28% 10.67% 15.79% 10.87%
EBIDTAM (%) 25.33 26.74 19.72 26.36
Adj. PAT -1339 -1294 -458 31
Growth (%) -31.95% -3.34% -64.60% LP
Adj. EPS (INR) NA NA NA 0.03
P/E(x) NA NA NA NA
EV/EBIDTA 14.04 12.19 11.49 16.21
Net Debt/Equity NA NA NA NA
RoACE (%) NA NA NA 11.70
RoAE (%) NA NA NA NA
Dish TV reported its maiden net profit in Q4FY15 buoyed by strong subscriber addition and higher ARPU. Subscriber
addition was helped by delay in implementing Phase 3 & 4 of DAS and launch of regional offering - Zing. Zing is contributing
~22% of net incremental addition. After our recent interaction with the company, we believe that strong subscriber addition,
higher ARPU and lower content cost will help Dish TV to report strong growth in earnings.
Deepak Tewary
deepak.tewary@spagroupindia.com
Ph. No. 91 33 40114800/ 859
80
100
120
140
160
180
200
220
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Dish TV Sensex

2. 2
Entertainment - Electronic Media
Consolidated Revenue - FY15
91%
3%
3%
2% 1%
Subscription Revenue
Lease Rent
Bandwidth Income
Advertising Income
Oth Income
Consolidated Expense - FY15
21%
15%
14%
6%
5%
39%
Programming & oth. Cost
Selling & Distribution Exp
Oth Op. Exp
License Fee
Oth Exp
Employee Benefit Exp
Source:KPMG,SPAResearch
Source:Company, SPA Research
Source:DigitalTVResearcg,KPMG,SPAResearch
Growth in TV Households & Paid C&S Penetration
161 168 196
90%
82%
80%
0
50
100
150
200
250
2013 2014E 2019P
75%
80%
85%
90%
95%
TV Households (mn) Paid C&S Penetration (%) (RHS)
Number of Subscriber by Technology
68 70 55
27 5 5 5
25 29 45
67
85 90 94
37 40 48 61 72 74 769 10 11 11 12 12 12
2013 2014E 2015P 2016P 2017P 2018P 2019P
Analog Cable Digital Cable DTH Oth Digital
Global TV Subscribersby technology
532 368 317
331
239 185
196
320 374
578
264 341 357
439
94 170 208 475
90 112
191
18
19
36
2010 2013 2014E 2020P
Analog Terrestrial AnalogCable Digital Cable DTH DTT IPTV
Split bytechnology
20%
12%
24%
34%
23%
26%
13%
28%
7% 11%
1%
1%
2014E 2020P
Analog Terrestrial AnalogCable Digital Cable DTH DTT IPTV
Source:Company, SPA Research
Net Subscriber Base (mn)
8.5
9.6
10.7
11.4
12.9
FY11 FY12 FY13 FY14 FY15
ARPU (INR)
150 151
157
163
179
FY11 FY12 FY13 FY14 FY15
Market Share - FY15
Sun Direct
8%
Big TV
2%
Aitrel Digital
20%
Tata Sky
23%
Dish TV
27%
Videocon D2h
20%
Source: Company, SPA Research (based on gross subscribers)
Table 1: Status of Digitization - Dec 2014
Phase
Regulatory date of No. of paid C&S Non-digitized Digitization
shutdown subscribers(mn) Subscriber(mn) incl.DTH
Phase 1 Jun'12 12 1 >90% (100%
excl. Chennai)
Phase 2 Mar'13 22 1 >95%
Phase 3 Dec'15 32 14 ~50%
Phase 4 Dec'16 73 54 ~25%
Total 139 70 ~50%
Source:KPMG,SPAResearch

3. 3
Entertainment - Electronic Media
Financials
Income Statement
Year End March (INR mn) FY12 FY13 FY14 FY15
Net Sales 19579 21668 25090 27816
% Growth 36.28% 10.67% 15.79% 10.87%
Project / Production Charges 9972 11081 13283 13954
Employee Cost 748 822 892 1013
Other Optg. Exps. 3900 3971 5968 5519
Total Optg. Exps. 14619 15874 20142 20485
EBIDTA (excl OI) 4960 5794 4947 7331
% Growth 108.36% 16.82% -14.62% 48.18%
EBITDA Margin % 25.33% 26.74% 19.72% 26.36%
Dep./Amortization 5219 6276 5974 6138
EBIT -259 -482 -1026 1193
EBIT Margin % -1.32% -2.22% -4.09% 4.29%
Interest Expense 1973 1284 1328 1754
Other Income 900 1106 778 635
Exceptionals
EBT -1331 -660 -1576 74
Tax Expenses 0 0 1 42
PAT -1331 -660 -1576 31
Minority Interest 0 0 0 0
Adjustment to PAT 8 634 -1118 0
APAT -1339 -1294 -458 31
% Growth -31.95% -3.34% -64.60% LP
APAT Margin % -6.84% -5.97% -1.83% 0.11%
Balance Sheet
Year End March (INR mn) FY12 FY13 FY14 FY15
Share Capital 1064 1065 1065 1066
Reserves and Surplus -2002 -2621 -4191 -4199
Total Networth -939 -1556 -3126 -3134
Minority Interest 0 0 0 0
Secured 12753 16330 14095 11250
Unsecured 1250 0 0 0
Total Debt 14003 16330 14095 11250
Deferred Tax Liability 0 0 0 0
Other Liabilities 1904 1632 1060 248.2
Sources of Funds 14968 16406 12029 8364
Net Block 14204 14340 13571 19510
CWIP 3884 6535 4226 0
Investments 1500 2782 2000 2000
Current Assets 6335 7147 6951 9147
Current Liabilities 11372 15142 15673 23299
Net Current Assets -5037 -7995 -8722 -14152
Misc. Expenditure 0 0 0 0
Deferred Tax Assets 0 0 0 0
Other Assets 418 743 954 1006
Application of Funds 14968 16406 12029 8364
Cash Flow
Year End March (INR mn) FY12 FY13 FY14 FY15
EBT -1331 -660 -1576 74
Less: Other Income/Exceptionals -900 -1106 -778 -635
Add:Depreciation 5219 6388 5974 6138
Add: Interest paid 1973 1284 1328 1754
Direct taxes paid 0 0 -1 -42
Change in Working Capital -2346 2684 509 5430
Cash Flow from operations (a) 4414 10802 7012 12719
Change in Fixed Assets -4136 -6523 -5199 -5940
Change in CWIP 537 -2651 2309 -1321
Change in Investments 500 -1282 782 0
Cash Flow from Investing (b) -3099 -10456 -2108 -7261
Change in Equity 23 43 3 1
Debt Raised/(Repaid) 3240 2327 -2235 -2846
Dividend paid 0 0 0 0
Interest paid -1973 -1284 -1328 -1754
Cash Flow from Financing (c ) 1290 1086 -3559 -4599
Net Change in Cash (a+b+c) 2604 1431 1345 859
Opening Cash 3257 3919 3645 3426
Closing Cash 3919 3645 3426 4286
Key Ratios
Year End March FY12 FY13 FY14 FY15
Per Share Data (INR)
Reported EPS -1.25 -0.62 -1.48 0.03
Adj. EPS -1.26 -1.22 -0.43 0.03
Growth (%) NA NA NA LP
CEPS 3.65 4.68 5.18 5.79
DPS 0 0 0 0
BVPS -0.88 -1.46 -2.94 -2.94
Return Ratios (%)
RoACE NA NA NA 11.70
RoANW NA NA NA NA
RoIC NA NA NA 0.38
Liquidity Ratios
Net Debt/Equity NA NA NA NA
Interest Coverage Ratio NA NA NA 0.68
Current Ratio 0.56 0.47 0.44 0.39
Quick Ratio 0.55 0.47 0.44 0.39
Efficiency Ratios
Asset Turnover Ratio 1.38 1.51 1.85 1.43
Inventory Days 1.28 1.45 1.09 1.30
Debtor Days 5.33 5.11 6.04 8.36
Creditor Days 23.77 66.93 29.00 16.64
Valuation Ratios
P/E(x) NA NA NA NA
P/BV (x) NA NA NA NA
P/CEPS (x) 17.48 12.71 12.62 18.13
Dividend Yield (%) 0 0 0 0
EV/Net Sales (x) 3.99 3.88 2.64 4.27
EV/EBIDTA(x) 13.32 12.19 11.55 16.21

4. 4
Entertainment - Electronic Media
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