Direct-to-home (DTH) services provider Dish TV Ltd.'s stock may see 50 percent increase over the next two years, brokerage firm CLSA said in a report, while maintaining a ‘buy' rating with 12-month target price of Rs 112.
Dish TV's stock has seen a steep 32 percent correction, mainly on the account of lower average revenue per unit (ARPU) seen post demonetisation, which caused delays in recharges and down-trading of packages.
The report said the stock is ignoring potential synergies from the merger with Videocon d2h Ltd., which is expected to conclude by October. Even without content cost synergies, lower staff and selling, general and administrative cost could boost the combined entity's earnings before interest, tax, depreciation and ammortisation by 6 percent.
Even at a lower ARPU level of Rs 143 expected in financial year 2017-18 for Dish TV and no ARPU increase for Videocon d2h until FY19, the combined entity will still be worth Rs 101 per share, implying 36 percent upside from current levels. Also, Dish TV's free cashflows will ensure the company continues to capitalise on the ongoing digitisation.CLSA Report
The brokerage also believes that Telecom Regulatory Authority of India's new tariff and interconnect regulations, if implemented, will explicitly drive the margins by the capacity charge for distributors and pay channel costs of which distributors will receive 20-35 percent as distribution fee.
Also Read: Dish TV And Videocon Join Hands In India
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