Portfolio

Braving the odds: The screen sizzles - Dish TV

K Venkatasubramanian | Updated on January 24, 2018 Published on July 12, 2015

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Indian companies stumbled through FY 15, with sharp deterioration in performance in the second half. While revenue for CNX 500 companies contracted by 2.9 per cent in the six months to March 2015, earnings fell 25 per cent. But there were some companies that proved their mettle by recording strong numbers in this period.

Despite being in the intensively competitive DTH (direct to home) provider market, Dish TV has held on to its own.

The domestic satellite TV market has as many as six DTH operators (Tata Sky, Airtel Digital TV, Videocon D2H, etc.).

Dish TV has managed to take the top position with a domestic market share of 27 per cent.

The continuously increasing average revenue per user (ARPU), steady decline in subscriber acquisition costs and an expanding customer base are the key positives for the company. Optimisation of key cost heads is leading to improving profit margins as well.

The stock has run up nearly 40 per cent in the last couple of months as the company returned to profitability in FY15 after a long period of losses.

The company’s stock though, has not turned expensive, especially if investors want to bet on it with a two-year horizon.

At ₹103, the share trades at an EV/EBITDA (enterprise value to operating profits) multiple of 10 times based on its likely FY17 numbers, which is lower than what it has traded at over the past several years (14-15 times).

Dish TV has turned marginally profitable in FY15 (₹3.1 crore) and is likely to build on this in the next few years. In 2014-15, the company’s revenues rose nearly 11 per cent to ₹2,782 crore, while operating profit (EBITDA) rose 17.5 per cent to ₹733 crore. Its operating profit margin of 26.4 per cent is among the best in the industry.

Dish TV had a base of 12.9 million customers as of March 2014. Subscriber addition has been quite healthy for the company, with an addition of 1.5 million customers in 2014-15.

In the last one year the company’s average revenue per user has increased from ₹163 to ₹179. Dish TV is also focusing on selling more of its HD set-top boxes.

Around 22 per cent of its incremental additions in recent quarters are from HD customers and a regional-languages-focused package ‘Zing’, which would bolster its ARPU.

Operationally, programming and sales and development costs, as a percentage of revenue, are down to 31 per cent in FY15, from over 50 per cent levels about three years ago. At ₹1,725 per customer, Dish TV’s subscriber acquisition cost has declined by over ₹500 in the last three years, indicating that the company is not having to spend more on enhancing its customer base.

Published on July 12, 2015
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