High costs to take toll on Dishtv

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26 May 2011
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Dish TV India (DTIL) has outperformed Sensex by 37% year to date, and is now 2% above our new price target (raised by 18%). We see little scope for a substantial positive surprise. Also, valuations don’t suggest an upside.

We go with a downgrade for three reasons. First, EV/Ebitda multiple of 13.2x on our revised FY13 estimates implies a premium of 45% over our media coverage universe. We are unable to justify an uptick in this premium. Second, there is a limited potential upside to consensus expectations. In the past month, one-year forward consensus Ebitda forecast rose 146%. DTIL may find it tough to beat on timing of PAT turnaround, subsriber addition and ARPU growth.Third reason is that we have curbed our Ebitda margin profile (lower by 479 bps and 1,234 bps in FY12 and FY13). We now expect higher costs than before and relatively modest ARPU growth.

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