MOSL: DISH TV INDIA (Buy)-Demon hangover and pack down-trading impact performance-Toning down ARPU/sub addition expectations

DISH TV INDIA: Demon hangover and pack down-trading impact performance; Toning down ARPU/sub addition expectations, EPS and TP

(DITV IN, Mkt Cap USD1.4b, CMP INR92, TP INR106, 15% Upside, Buy)

• ​Operational performance disappoints: While demon hangover was expected to continue hurting subscriber additions and recharges, we note that the results significantly missed the already low expectations. 4QFY17 EBITDA declined ~24% QoQ to INR1.91b (22% below est. of INR2.44b), primarily led by lower-than-expected subscription revenue and subsequent unfavorable operating leverage. DITV reported net loss of INR284m (est. of PAT of INR164) due to the EBITDA miss.
  
• Big miss on subscription: Subscription revenue fell 10% QoQ to INR6.2b (11% below est. of INR7b) as (1) demon hangover exerted pressure on monthly recharges and subs additions and (2) portion of HD subs base downtraded packs to SD services. DITV recognized subscription-related income of ~INR330m in other operating revenue, as per audit rules. Like-to-like subscription revenue fell 6% QoQ/YoY (6% miss).
  
• Key performance indicators sub-par: DITV added 165k net subscribers in 4QFY17 (est. of +230k) and 1.03m in FY17. It guided for ~1.2-1.3m net adds for FY18. ARPU fell 11% QoQ to ~INR134 (est. of INR151). For FY18/FY19, we have toned down estimate for net subs addition to 1.3m/1.5m (22%/3% cut) and for ARPU to INR153/INR159 (6% cut).