 "Dish TV: Strong quarter, improving prospects")
The Dish TV stock has gained eight per cent in April on expectations of digitisation rollout, increase in average revenue per user (Arpu) and a strong performance in the March quarter. The ongoing Indian Premier League could add to gains. Price hikes should also improve prospects.
Analysts at HSBC estimate that the recent rate hikes by direct-to-home (DTH) and cable firms should lead to an Arpu increase of four-eight per cent. They believe the Arpu upside for DTH firms will be at the lower end of the band (four per cent) given the recent increase in service and entertainment taxes and subscriber additions in lower-end packs priced at Rs 99. The stock, which had lost 40 per cent between August 2015 and the beginning of March 2016, has since erased 27 per cent of that loss.
The immediate trigger is the results for the March quarter. Driven by subscriber addition of 0.5 million on the back of the deadline for Phase-III of digitisation and Arpu increase of 2.3 per cent on a sequential basis — down 1.5 per cent year-on-year (y-o-y) — revenues are expected to increase 11 per cent y-o-y and five per cent sequentially. Subscriber addition in the December quarter was 320,000.
Analysts expect operating profit margins to move up 450 basis points (bps) y-o-y and 30 bps sequentially to 34 per cent on improving operating leverage. Net profit for the quarter is expected to be around Rs 70 crore, which is double that of the year-ago quarter. Analysts at ICICI Securities say the Arpu increase due to activation revenues from subscriber additions could offset the impact of low-Arpu subscribers in Phase-III.
HSBC analysts say that as of now, there does not seem a meaningful threat in the next six-12 months. On the subscriber growth front, a favourable verdict from the courts, which had stayed digitisation in multiple markets, will be a positive; so will the plea of DTH operators for lower licence fee, which is also pending with the courts.
Analysts at HSBC estimate that the recent rate hikes by direct-to-home (DTH) and cable firms should lead to an Arpu increase of four-eight per cent. They believe the Arpu upside for DTH firms will be at the lower end of the band (four per cent) given the recent increase in service and entertainment taxes and subscriber additions in lower-end packs priced at Rs 99. The stock, which had lost 40 per cent between August 2015 and the beginning of March 2016, has since erased 27 per cent of that loss.
The immediate trigger is the results for the March quarter. Driven by subscriber addition of 0.5 million on the back of the deadline for Phase-III of digitisation and Arpu increase of 2.3 per cent on a sequential basis — down 1.5 per cent year-on-year (y-o-y) — revenues are expected to increase 11 per cent y-o-y and five per cent sequentially. Subscriber addition in the December quarter was 320,000.
Analysts expect operating profit margins to move up 450 basis points (bps) y-o-y and 30 bps sequentially to 34 per cent on improving operating leverage. Net profit for the quarter is expected to be around Rs 70 crore, which is double that of the year-ago quarter. Analysts at ICICI Securities say the Arpu increase due to activation revenues from subscriber additions could offset the impact of low-Arpu subscribers in Phase-III.
HSBC analysts say that as of now, there does not seem a meaningful threat in the next six-12 months. On the subscriber growth front, a favourable verdict from the courts, which had stayed digitisation in multiple markets, will be a positive; so will the plea of DTH operators for lower licence fee, which is also pending with the courts.