Before I begin, If you are a short term trader please skip this recommendation.
Dish TV is one of the early entrant in the Direct-to-home (DTH) arena and currently the only listed player in this segment. As of 30th June'07 Dish TV has a strong 2.1 million subscribers. The company is currently investing to acquire subscribers and is yet to break even. The average cost of customer acquisition currently is around Rs. 2000/- per subscriber. Dish TV currently enjoys a market share of 75% in the DTH business which is going to provide a better edge for the firm when competition steps up with new entrants. The company currently has 170 channels in it's basket, which is the highest in the industry.
Dish TV is currently present in 4300 towns through more than 30000 dealers and 400 distributors. There are over 10000 service personals and 1000 call center agents to deliver more value to customers. Currently top 50 cities accounts to 33% of the subscriber base which shows the demand is equally distributed across pan India and not only in metros.
Based on the Estimates the company is expected to generate Operating profit by FY09 and net profit by FY10. Considering the current demand scenario analyst estimates the subscriber base to grow at compounded annual growth rate of 25% till FY12. The existing subscriber investment is expected to add on to the revenue growth by around 20-35% q-o-q.
The company is currently moving around it's 52 week low of Rs. 69/-. Adopt a invest on decline strategy on this stock. Invest in smaller chunks at regular intervals rather than having it brought in lots.
Fundamentals
1) Market share of 75% in the DTH segment.
2) The company has a established dealers and distributors network and wide coverage across pan India.
Risks
1) The company is currently a loss making firm. It has a negative operating profit till date.
2) Stiff competition expected from new entrants like Reliance, Sun, Barathi etc. in the years to come.
3) Initial investment being made currently per customer acquisition and advertisement costs is likely to impact the operating profit for sometime.
4) The company is planing an additional capex of Rs. 1300 crores through debt and equity. This inturn will increase the interest expense and can further dampen the earnings visibility.
5) Customer service being a key to this industry, the firm is expected to increase the on call personals and call center executive for faster and prompt service. This inturn is going to add to the expenses of the company.
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Wednesday, September 26, 2007
Dish TV - A Turn around story
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