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Dish TV, India’s largest direct-to-home service provider, is set to turn net-profit positive this fiscal on the back of subscriber growth and improvement in average revenue per user (Arpu).
The company’s ability to generate good free cash flow will help it achieve this feat.
Suresh A Mahadevan and Varun Ahuja, analysts, UBS Securities India, said in a company note that Dish TV had already generated Rs 60 crore of free cash flow (FCF) in the first nine months of fiscal 2013. “We believe the company will continue to generate FCF and expect it to generate FCF of around Rs 100 crore in fiscal 2014. Further, we expect the company to turn net income positive from fiscal 2014,” the analysts said.
The said FCF generation coupled with net income breaking even is likely to drive a re-rating.
Dish TV officials couldn’t be reached for a comment.
With Phases I and II of digitisation progressing well, the ensuing phases (III and IV) are being seen by the analysts as very important for Dish TV on two accounts. One, the market size for the balance two phases is substantial with around 80-90 million households. Two, the absence of big multi-system operators (MSOs) in these phases. As a result, Dish TV’s net subscriber base is expected to reach 15.5 million by fiscal 2016, up from 10.5 million as of December 2012.
“Dish TV would emerge as one of the beneficiaries of digitisation given its leadership position in the sector. The recent move by DTH operators to increase the prices of set-top boxes (STBs) and base packages indicates the emergence of pricing power, which bodes well for Dish TV,” the analysts said.
They also expect Dish TV’s revenue to grow at a three-year compounded annual growth rate (CAGR) of 22%. The companys operating profit margins are likely to expand 3.5% by fiscal 2016 as the company benefits from the implementation of digitisation (Phases 3 and 4).
This, the UBS analysts said, is likely to aid subscriber growth and Arpu improvement.
Digitisation is also expected to boost Arpu that is pegged to grow at a CAGR of 9% over the next three years as overall tariffs move up and customers move the tariff curve (higher packages, HD etc). Earlier this month, Dish TV had announced a Rs 20 hike in its base package thus aiding Arpu improvement in fiscal 2014.
“We believe a pick-up in Arpu is the key for a stock re-rating as the improvement would result in higher profitability. The company’s Arpu has grown at a CAGR of 4% over the past three years,” the analysts said.
Digitisation to help Dish TV post a net profit this fiscal - Money - DNA
The company’s ability to generate good free cash flow will help it achieve this feat.
Suresh A Mahadevan and Varun Ahuja, analysts, UBS Securities India, said in a company note that Dish TV had already generated Rs 60 crore of free cash flow (FCF) in the first nine months of fiscal 2013. “We believe the company will continue to generate FCF and expect it to generate FCF of around Rs 100 crore in fiscal 2014. Further, we expect the company to turn net income positive from fiscal 2014,” the analysts said.
The said FCF generation coupled with net income breaking even is likely to drive a re-rating.
Dish TV officials couldn’t be reached for a comment.
With Phases I and II of digitisation progressing well, the ensuing phases (III and IV) are being seen by the analysts as very important for Dish TV on two accounts. One, the market size for the balance two phases is substantial with around 80-90 million households. Two, the absence of big multi-system operators (MSOs) in these phases. As a result, Dish TV’s net subscriber base is expected to reach 15.5 million by fiscal 2016, up from 10.5 million as of December 2012.
“Dish TV would emerge as one of the beneficiaries of digitisation given its leadership position in the sector. The recent move by DTH operators to increase the prices of set-top boxes (STBs) and base packages indicates the emergence of pricing power, which bodes well for Dish TV,” the analysts said.
They also expect Dish TV’s revenue to grow at a three-year compounded annual growth rate (CAGR) of 22%. The companys operating profit margins are likely to expand 3.5% by fiscal 2016 as the company benefits from the implementation of digitisation (Phases 3 and 4).
This, the UBS analysts said, is likely to aid subscriber growth and Arpu improvement.
Digitisation is also expected to boost Arpu that is pegged to grow at a CAGR of 9% over the next three years as overall tariffs move up and customers move the tariff curve (higher packages, HD etc). Earlier this month, Dish TV had announced a Rs 20 hike in its base package thus aiding Arpu improvement in fiscal 2014.
“We believe a pick-up in Arpu is the key for a stock re-rating as the improvement would result in higher profitability. The company’s Arpu has grown at a CAGR of 4% over the past three years,” the analysts said.
Digitisation to help Dish TV post a net profit this fiscal - Money - DNA
