BIG BOSS
VIKAS PARSHURAM SAMWATSARE
8/10/2013
Buy Dish TV India For Target Rs.65
We are upgrading Dish TV from Neutral to Buy based on 1) attractive valuations post significant stock underperformance, 2) strong FCF generation, and 3) expected favorable pricing environment. Our 3-5% EBITDA upgrade for FY15/16 and rollover of DCF drive increase in TP from INR57 to INR65 (implied FY15 EV/EBITDA of ~10x). Dish TV stock is down 35% CYTD and has underperformed the Sensex by 37% largely due to margin disappointment (content cost inflation) and lower-than-expected incremental share in phase I/II digitization. Valuations have corrected sharply from ~15x one-year forward EV/EBITDA in Dec-12 to <10x currently. Despite relatively higher earnings visibility vs MSOs due to its direct ownership of end subscribers, Dish TV is trading at ~30% discount vs Hathway on EV/ proportionate subscriber basis.
Price discipline evident from sustained hikes; focus shifts to profitability
We expect favorable pricing environment led by increasing financial stress for DTH industry, transition to gross billing for phase I/II cable subscribers, and phase III/IV digitization. Dish TV has increased strategic focus on ARPU/profitability and subscriber quality. During CY13, Dish TV has hiked entry prices thrice (9-13% each) and increased monthly pack rates by 5-10%, reflecting improving industry discipline. Although this has led to moderation in subscriber growth (gross adds down ~25% YoY), other operating metrics have witnessed improvement: 1) subscriber acquisition cost down 15% YoY, 2) monthly churn down to 0.6% and, 3) ARPU up 4% YoY to ~INR 165.
Cost inflation behind; EBITDA growth to revive
While subscription revenue growth has held up well at ~15% YoY for past five quarters, Dish TV’s EBITDA margin declined from 29.2% in 2QFY13 to 21.0% in 1QFY14 due to step-up in the programming costs (up ~600bp to 33% of revenue). However, with renegotiation with Media-Pro (~40% of content cost) behind, we expect operating leverage to start kicking-in. While EBITDA growth on a full year basis is expected to remain subdued (~4% YoY growth in FY14E), our estimates build-in sharp QoQ EBITDA improvement for balance of FY14.
Strong FCF generation to drive de-leveraging
Dish TV reached FCF break-even in FY13 and we expect cumulative FCF of ~INR8b over FY13-16E as compared FY13 net debt of ~INR9.9b.
Key concerns: INR depreciation, further deceleration in subs growth
A 5% depreciation in INR vs USD increases capex for Dish TV by ~INR280m. While Dish TV has been raising entry-level pricing, subscriber elasticity remains key. Average net subscriber growth declined from 28% in FY12 to 12% in FY13. Further sharp deceleration can pose risks to our ~10% net subscriber CAGR estimate for FY13-16E which is crucial to attain the operating leverage benefit.
Buy Goodyear India Ltd. For Target Rs.360.00
We initiated coverage of Goodyear India Ltd. and set a target price of Rs. 360.00 for Medium term Investment.
* Goodyear is one of the world’s largest tire companies.
* The company’s net profit registered 79.79% increase and stood at a record Rs. 256.20 million from Rs. 142.50 million over the corresponding quarter last year.
* The company’s net sales registered 5.45% increase and stood at a record Rs. 4229.90 million from Rs. 4011.10 million over the corresponding quarter last year.
* The company has reported an EPS of Rs. 11.11 for the 1st quarter as against an EPS of Rs. 6.18 in the corresponding quarter of the previous year.
* Goodyear’s new right-side tire for Atlanta marks the introduction of its (NASCAR) Multi- Zone Tread Technology.
* Net Sales and PAT of the company are expected to grow at a CAGR of 2% and 3% over 2011 to 2014E respectively.
* Indian tyre makers manufactured about 125.4 million tyres, with the 7 leading players accounting for 80% of all the production.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q2 CY13,
Goodyear is one of the world’s largest tire companies, has reported its financial results for the quarter ended 30 JUNE, 2013.
Goodyear India Ltd achieved a turnover of Rs. 4229.90 million for the 1st quarter of the current year 2013-14 as against Rs. 4011.10 millions in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 469.00 millions and a net profit of Rs. 256.20 million against Rs. 142.50 million reported respectively in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 11.11 for the 1st quarter as against an EPS of Rs. 6.18 in the corresponding quarter of the previous year.
OUTLOOK AND CONCLUSION
* At the current market price of Rs. 303.00, the stock P/E ratio is at 11.07 x CY13E and 10.04 x CY14E respectively.
* Earning per share (EPS) of the company for the earnings for CY13E and CY154E is seen at Rs.27.37 and Rs.30.18 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 2% and 3% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 5.42 x for CY13E and 4.89 x for CY14E.
* Price to Book Value of the stock is expected to be at 1.73 x and 1.49 x respectively for CY13E and CY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.360.00 for Medium to Long term investment.
Buy Crompton Greaves Ltd. For Target Rs.98.00
Crompton Greaves Ltd is a global pioneering leader in the management and application of electrical energy.
* The company’s net profit registered a 3.63% increase and stood at a record Rs. 1246.30 mn from Rs. 1202.70 mn over the corresponding quarter last year.
* Revenue for the quarter rose by 9.66% to Rs. 18194.20 million from Rs. 16591.70 million, when compared with the prior year period.
* During the quarter, EBITDA is increased by 3.28% to Rs. 1822.20 mn against Rs. 1764.30 mn in Q1 FY13.
* During the quarter ended 30th June, 2013, the Company has received orders worth of Rs. 24410 million.
* From Railway segment in India, Crompton Greaves has received orders worth Rs. 176 crores.
* The Company has bagged contract from Power Grid Corporation of India for 765 kV Power Transformer valued at Rs 231.7 crores.
* Net Sales of the company are expected to grow at a CAGR of 9% over 2012 to 2015E.
* CG has been awarded a contract worth € 3.5 mn for the design, engineering, supply, installation & commissioning of a wind farm substation at the 75 MW Seine Rive Gauche Nord wind farm in France. CG has inaugurated motor facility in Bhopal for meet the growing global demand for drives and motors.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q1 FY14,
Crompton Greaves Limited is one of the India’s largest engineering conglomerates with diversified portfolio of products, solutions & services, reported its financial results for the quarter ended 30th June, 2013.
The company’s net profit jumps to Rs. 1246.30 million against Rs. 1202.70 million in the corresponding quarter ending of previous year, an increase of 3.63%. Revenue for the quarter rose by 9.66% to Rs. 18194.20 million from Rs. 16591.70 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 1.94 a share during the quarter, registering 3.63% increase over previous year period. Profit before interest, depreciation and tax is Rs. 1822.20 millions as against Rs. 1764.30 millions in the corresponding period of the previous year.
OUTLOOK AND CONCLUSION
* At the current market price of Rs.87.00, the stock P/E ratio is estimated 12.09 x FY14E and 11.06 x FY15E respectively.
* Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 7.19 and Rs. 7.87 respectively.
* Net Sales of the company are expected to grow at a CAGR of 9% over 2012 to 2015E respectively.
* On the basis of EV/EBITDA, the stock trades at 7.83 x for FY14E and 7.05 x for FY15E.
* Price to Book Value of the stock is expected to be at 1.63 x and 1.49 x respectively for FY14E and FY15E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.98.00 for Medium to Long term investment.
VIKAS PARSHURAM SAMWATSARE
8/10/2013
Buy Dish TV India For Target Rs.65We are upgrading Dish TV from Neutral to Buy based on 1) attractive valuations post significant stock underperformance, 2) strong FCF generation, and 3) expected favorable pricing environment. Our 3-5% EBITDA upgrade for FY15/16 and rollover of DCF drive increase in TP from INR57 to INR65 (implied FY15 EV/EBITDA of ~10x). Dish TV stock is down 35% CYTD and has underperformed the Sensex by 37% largely due to margin disappointment (content cost inflation) and lower-than-expected incremental share in phase I/II digitization. Valuations have corrected sharply from ~15x one-year forward EV/EBITDA in Dec-12 to <10x currently. Despite relatively higher earnings visibility vs MSOs due to its direct ownership of end subscribers, Dish TV is trading at ~30% discount vs Hathway on EV/ proportionate subscriber basis.
Price discipline evident from sustained hikes; focus shifts to profitability
We expect favorable pricing environment led by increasing financial stress for DTH industry, transition to gross billing for phase I/II cable subscribers, and phase III/IV digitization. Dish TV has increased strategic focus on ARPU/profitability and subscriber quality. During CY13, Dish TV has hiked entry prices thrice (9-13% each) and increased monthly pack rates by 5-10%, reflecting improving industry discipline. Although this has led to moderation in subscriber growth (gross adds down ~25% YoY), other operating metrics have witnessed improvement: 1) subscriber acquisition cost down 15% YoY, 2) monthly churn down to 0.6% and, 3) ARPU up 4% YoY to ~INR 165.
Cost inflation behind; EBITDA growth to revive
While subscription revenue growth has held up well at ~15% YoY for past five quarters, Dish TV’s EBITDA margin declined from 29.2% in 2QFY13 to 21.0% in 1QFY14 due to step-up in the programming costs (up ~600bp to 33% of revenue). However, with renegotiation with Media-Pro (~40% of content cost) behind, we expect operating leverage to start kicking-in. While EBITDA growth on a full year basis is expected to remain subdued (~4% YoY growth in FY14E), our estimates build-in sharp QoQ EBITDA improvement for balance of FY14.
Strong FCF generation to drive de-leveraging
Dish TV reached FCF break-even in FY13 and we expect cumulative FCF of ~INR8b over FY13-16E as compared FY13 net debt of ~INR9.9b.
Key concerns: INR depreciation, further deceleration in subs growth
A 5% depreciation in INR vs USD increases capex for Dish TV by ~INR280m. While Dish TV has been raising entry-level pricing, subscriber elasticity remains key. Average net subscriber growth declined from 28% in FY12 to 12% in FY13. Further sharp deceleration can pose risks to our ~10% net subscriber CAGR estimate for FY13-16E which is crucial to attain the operating leverage benefit.
Buy Goodyear India Ltd. For Target Rs.360.00We initiated coverage of Goodyear India Ltd. and set a target price of Rs. 360.00 for Medium term Investment.
* Goodyear is one of the world’s largest tire companies.
* The company’s net profit registered 79.79% increase and stood at a record Rs. 256.20 million from Rs. 142.50 million over the corresponding quarter last year.
* The company’s net sales registered 5.45% increase and stood at a record Rs. 4229.90 million from Rs. 4011.10 million over the corresponding quarter last year.
* The company has reported an EPS of Rs. 11.11 for the 1st quarter as against an EPS of Rs. 6.18 in the corresponding quarter of the previous year.
* Goodyear’s new right-side tire for Atlanta marks the introduction of its (NASCAR) Multi- Zone Tread Technology.
* Net Sales and PAT of the company are expected to grow at a CAGR of 2% and 3% over 2011 to 2014E respectively.
* Indian tyre makers manufactured about 125.4 million tyres, with the 7 leading players accounting for 80% of all the production.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q2 CY13,
Goodyear is one of the world’s largest tire companies, has reported its financial results for the quarter ended 30 JUNE, 2013.
Goodyear India Ltd achieved a turnover of Rs. 4229.90 million for the 1st quarter of the current year 2013-14 as against Rs. 4011.10 millions in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 469.00 millions and a net profit of Rs. 256.20 million against Rs. 142.50 million reported respectively in the corresponding quarter of the previous year. The company has reported an EPS of Rs. 11.11 for the 1st quarter as against an EPS of Rs. 6.18 in the corresponding quarter of the previous year.
OUTLOOK AND CONCLUSION
* At the current market price of Rs. 303.00, the stock P/E ratio is at 11.07 x CY13E and 10.04 x CY14E respectively.
* Earning per share (EPS) of the company for the earnings for CY13E and CY154E is seen at Rs.27.37 and Rs.30.18 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 2% and 3% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 5.42 x for CY13E and 4.89 x for CY14E.
* Price to Book Value of the stock is expected to be at 1.73 x and 1.49 x respectively for CY13E and CY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.360.00 for Medium to Long term investment.
Buy Crompton Greaves Ltd. For Target Rs.98.00 Crompton Greaves Ltd is a global pioneering leader in the management and application of electrical energy.
* The company’s net profit registered a 3.63% increase and stood at a record Rs. 1246.30 mn from Rs. 1202.70 mn over the corresponding quarter last year.
* Revenue for the quarter rose by 9.66% to Rs. 18194.20 million from Rs. 16591.70 million, when compared with the prior year period.
* During the quarter, EBITDA is increased by 3.28% to Rs. 1822.20 mn against Rs. 1764.30 mn in Q1 FY13.
* During the quarter ended 30th June, 2013, the Company has received orders worth of Rs. 24410 million.
* From Railway segment in India, Crompton Greaves has received orders worth Rs. 176 crores.
* The Company has bagged contract from Power Grid Corporation of India for 765 kV Power Transformer valued at Rs 231.7 crores.
* Net Sales of the company are expected to grow at a CAGR of 9% over 2012 to 2015E.
* CG has been awarded a contract worth € 3.5 mn for the design, engineering, supply, installation & commissioning of a wind farm substation at the 75 MW Seine Rive Gauche Nord wind farm in France. CG has inaugurated motor facility in Bhopal for meet the growing global demand for drives and motors.
QUARTERLY HIGHLIGHTS (STANDALONE)
Results updates- Q1 FY14,
Crompton Greaves Limited is one of the India’s largest engineering conglomerates with diversified portfolio of products, solutions & services, reported its financial results for the quarter ended 30th June, 2013.
The company’s net profit jumps to Rs. 1246.30 million against Rs. 1202.70 million in the corresponding quarter ending of previous year, an increase of 3.63%. Revenue for the quarter rose by 9.66% to Rs. 18194.20 million from Rs. 16591.70 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 1.94 a share during the quarter, registering 3.63% increase over previous year period. Profit before interest, depreciation and tax is Rs. 1822.20 millions as against Rs. 1764.30 millions in the corresponding period of the previous year.
OUTLOOK AND CONCLUSION
* At the current market price of Rs.87.00, the stock P/E ratio is estimated 12.09 x FY14E and 11.06 x FY15E respectively.
* Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 7.19 and Rs. 7.87 respectively.
* Net Sales of the company are expected to grow at a CAGR of 9% over 2012 to 2015E respectively.
* On the basis of EV/EBITDA, the stock trades at 7.83 x for FY14E and 7.05 x for FY15E.
* Price to Book Value of the stock is expected to be at 1.63 x and 1.49 x respectively for FY14E and FY15E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.98.00 for Medium to Long term investment.
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