Home >market >mark-to-market >Dish TV Q2 results beat doesn’t impress investors

Dish TV India Ltd shares fell 1.7% on Tuesday despite the company announcing a better-than-expected net profit for the quarter ended September. Of course, the broader market, too, was subdued. However, it’s quite likely that investors were disappointed with the company’s performance on the Arpu (average revenue per user) front.

Sure, Dish TV had to bear the brunt of increase in service tax effective 1 June. Its reported Arpu stood at 171 in the September quarter compared with 173 in the June quarter. The company maintains that excluding the impact of service tax increase, September quarter Arpu would have been 174, which really does not move the needle in a big way. In keeping with the service tax changes, Dish TV has revised its Arpu growth guidance to 4.5-6% from earlier 6% for this fiscal year. That could well be another disappointment for investors. Needless to say, how the company fares on the Arpu front would be a critical factor to watch out for investors.

Consolidated net profit came in at 87 crore, higher than Bloomberg consensus estimates. One reason why the company was able to beat estimates is due to the decline in depreciation costs compared with the same period last year. Additionally, Dish TV was able to contain its costs. Content costs, other operating costs and selling and distribution expenses as a percentage of revenue declined compared with last year. As a result, operating profit margin came in at 33.9%, an all-time high. Revenues increased 16% year-on-year to 752 crore, which was slightly lower than expectations.

It augurs well that Dish TV has maintained its subscriber additions guidance despite a somewhat lacklustre show in the September quarter, typically a seasonally slow one. Dish TV intends to add 1.5-1.7 million net subscribers this year. The company added 338,000 net subscribers last quarter. For some time now, one factor that has been driving subscriber additions for Dish TV is the product “Zing" aimed at customers interested in regional content and last quarter too would have felt its impact. In the June quarter, net subscribers’ addition was 390,000.

Despite investors’ lukewarm reaction to the company’s results, from a medium term perspective, shareholders haven’t lost out. Since the beginning of this fiscal year, Dish TV’s shares have risen by a third compared with a 2.5% decline in the Sensex. While that outperformance may cap meaningful gains in the near future, improvement in Arpu would act as a trigger for the stock.

The writer does not own shares in the above-mentioned companies.

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