Morgan Stanley downgrades Dish TV on expensive valuations

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7 Apr 2011
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Morgan Stanley has downgraded its rating on Dish TV to "equal-weight" from "overweight," saying current valuations are too expensive and factor in good progress the DTH (direct-to-home) service provider is making on subscriber additions, cost reductions and ARPU (average revenue per user) growth.

"Dish TV has outperformed the sensex by 37% year-to-date...We see little scope for substantial positive surprise for the street. Nor do valuations suggest upside to us," analysts Vipul Prasad and Ketaki Kulkarni said in a report on Wednesday.

Since start of April Dish TV shares have gone up 34.5% on NSE, while the broader Nifty index has fallen 3.5% over the same period.

However, the analysts didn’t go in for a sharper downgrade as they feel Dish TV will be among the bigger beneficiaries amidst the ongoing digitization in India.

"We expect 22% CAGR in average net subscriber base in fiscal 2011-13, implying about 25% gross incremental market share," Prasad and Kulkarni said.

Dish TV’s ARPU should grow at 10% CAGR over the same period, they said.

Dish TV currently has a market share of around 31%. While the total number of subscribers will grow, year-on-year growth is expected to fall this fiscal due to a high base of people who have already shifted to DTH, the two analysts said.

Dish TV shares Wednesday closed down 0.8% at Rs 89.50 on NSE.

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