MOSL: SITI NETWORK (Neutral)-Re-aligning Phase III/IV monetization expectations
​SITI Network: Re-aligning Phase III/IV monetization expectations; Maintain Neutral; Operational performance below expectations
(SITINET IN, Mkt Cap USD0.4b, CMP INR31, TP INR36, 14% Upside, Neutral)
- EBITDA (ex-activation) misses estimates: Consol. EBITDA grew 5% QoQ to INR580m (est. of INR669m). EBITDA (ex-activation) grew 16% QoQ to INR96m (est. of INR127m), led by higher content payout. Opex grew 10% QoQ to INR2.67b (est. of INR2.42b). Net losses increased significantly QoQ to INR649m (est. of INR323m).
- Subscription up 9% QoQ, exceeds expectations: Subscription income grew 9% QoQ to INR1.6b (3% above est. of INR1.55b) as Phase III monetization picked up. Carriage revenue surprised positively (+9% QoQ) as negative arbitrage v/s peers narrowed down.
- Phase I collections stagnant; broadband disappoints: Phase I collections remained largely stagnant at INR105 (v/s INR103 in 3Q). Phase II collections improved from INR78/subscriber/month to INR82. Phase III/Phase IV collections stood at INR50/INR25 per sub per month. Broadband revenue grew 3% QoQ to INR0.27b (est. of INR0.29) as competitive pressure from RJio kept subscriber additions weak. SITINET added 15k broadband (BB) subscribers in 4Q, taking the total to 228k.
- Box seeding remained healthy; in-line: SITINET seeded 0.8m set-top boxes in 4Q (in-line). Management expects to seed ~3m boxes in FY18. We believe SITINET would exit FY18 with 12m digital subscribers.
Siti Networks Limited, formerly Siti Cable Network Limited, is a holding company. The Company is a multi-system operator (MSO), which is engaged in providing cable television network services, Internet services and allied services. The Company is engaged in the business of distribution of signals of television channels of various broadcasters. Its product range includes digital and analog cable television, broadband and local television channels. The Company operates through cable distribution in India. The Company has a portfolio of assets in media, packaging, entertainment, technology-enabled services, infrastructure development and education. The Company provides services in analog and digital mode, armed with technical solution to provide features, such as Video on Demand and Electronic Programming Guide (EPG). The Company markets its products under SITI brand name. The Company provides its cable services in approximately 350 cities in India and the adjoining areas.
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Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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