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Motilal Oswal
Dish TV (Buy)
CMP: ₹76.65
Target: ₹106
Dish TV India Ltd is engaged in the business of direct to home (DTH) and teleport services. The company’s segments include DTH and teleport service, and infra support services.
DITV’s stock price has declined 27 per cent in the last six months on weak revenue/EBITDA performance.
Videocon D2H’s merger should drive synergies of ₹240 crore (340 bp synergy gains) in FY19 and ₹400 crore (510 bp synergy gains) in FY20, implying combined EBITDA of ₹2,680 crore in FY19 and ₹3,190 crore in FY20. Videocon’s high content cost of 40 per cent of total revenues (₹82/subscriber/ month against DITV’s 30 per cent or ₹51/subscriber/month) should get rationalised. Additionally, GST of 18 per cent as against 15 per cent service tax and 6-7 per cent entertainment tax should help save an additional 400-500 bp.
Though ARPU expectations remain moderate and DD Free Dish remains a near-term risk, we believe the current stock price does not factor in the high synergies expected from the merger of Videocon D2H.
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