CLSA lifts target price on Dish TV amid reasonable valuations, stock jumps 13.5%

In its recent report, global brokerage firm CLSA revised its target price for Dish TV India to ₹24 per share, up from the previous target of ₹18, citing the stock's cheap valuation at 8x FY25CL EV/EBITDA. The brokerage continues with its 'Outperform' rating on the stock. 

In response to this target price revision, the stock surged 13.5% during today's intraday trading, reaching ₹24.40 per share, surpassing the brokerage target price. 

CLSA highlighted Dish TV's achievement of becoming debt-free in 1QFY24, despite its disappointing performance in 3QFY24. Additionally, Dish TV has significantly reduced its debt burden over the past five years, repaying ₹32 billion mainly through internal cash generation.

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For Q3 FY24, Dish TV posted a revenue of ₹4.7 billion, which is down 2% on a QoQ basis and 4% below the brokerage estimates. EBITDA also missed the brokerage estimates, coming in at ₹1.8 billion, which is down 8% QoQ. Subscription revenue came in lower at 3.7 billion, down 6% QoQ. 

Programming costs are a pass-through in the new tariff regime, and the EBITDA margin at 38.4% was down 2 percentage points. The company reported a ₹28 million loss in 3QFY24 versus a profit of ₹54 million in the previous quarter.

With the miss in Dish TV’s 3QFY24 performance, the brokerage cut its FY24/26CL revenue and EBITDA by 18–37% but retained an 'Outperform' rating as the stock is cheap at 8x FY25CL EV/EBITDA. 

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There are a couple of upcoming events that could have an impact on the stock of Dish TV. Firstly, Tata Play, which is owned jointly by Tata Group and Walt Disney, is planning an IPO and fundraising. Secondly, it has been reported that Reliance Industries is looking to acquire 30% of Tata Play from Walt Disney. 

CLSA believes that these events could act as catalysts for Dish TV's stock. It valued Dish TV on a revised and rolled-forward EV/EBITDA multiple of 7x, a 25% premium to the five-year average.

DTH subscribers to grow again

The DTH sector had 72.4 million subscribers in FY19, but it declined to 64 million in September 2023, according to data from the regulator, TRAI. However, the top two players, Tata Play (32.4% share) and Airtel DTH (27%) have increased their combined share by 12 percentage points since FY19. Dish TV (21.5% share) is the third-largest player but has seen an 18-percentage point decline in its share. 

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CLSA believes that with the implementation of New Tariff Order (NTO) 3.0 and DTH operators promoting set-top boxes that combine OTT and linear TV, DTH subscriber growth is likely. Dish TV has also launched its OTT aggregation (17 OTTs) and 200 linear TV channels under the "Watcho" brand, which has 90 million users with 3.6 million paid subscriptions, it added.

At 02:45 pm, the stock was trading with a gain of 9.30% at ₹23.70 apiece. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.