den networks - result...

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Edelweiss Securities Limited

DEN Networks’ (DEN) Q4FY13 revenue and EBITDA surpassed our

expectations, primarily due to higher-than-expected set-top box (STB)

activation revenue. Key positive was the high digital subscriber additions

of 1.07mn during the quarter. This led to activation revenue of

INR540mn, and EBITDA margin, adjusted for accounting change wherein

MediaPro revenues are reported on net basis, catapulted 946bps YoY to

19%. Key negatives were: (i) surge in staff costs by ~37% YoY to

INR290mn due to higher incentives and new JVs; and (ii) higher tax

provisions and impairment of investments in Gujarat operations of

INR31.2mn, which led to PAT margin declining 83bps QoQ. We see value

in the stock from a two-year perspective. Maintain ‘BUY’.

Digitisation on track; billing to LCOs expected to increase

DEN’s total revenue in Q4FY13 stood at INR2,714mn, while cable revenue stood at

INR2,677mn. Cable business EBITDA came in at ~INR831mn in Q4FY13 compared to

~INR585mn in Q3FY13. Currently, average net billing from LCOs is ~INR50 per month

per set-top box. However, the company expects this to increase to INR90-100 over the

next three-four months. During the quarter, DEN seeded 1.07mn STBs; it has already

seeded ~5mn boxes in Phase 1 (~2mn) and Phase 2 (~3mn). In addition, the company

has a potential subscriber base of 6mn in Phase 3 and 4 areas.

Fund raising to fortify balance sheet

The company’s consolidated gross debt stands at INR7.5bn and net debt at INR3.5bn at

FY13 end (cash balance of INR4bn). Gross debt for the cable business stands at

INR7.25bn and net debt at INR3.06bn. DEN raised USD160mn fresh equity in May 2013.

While Goldman Sachs invested USD110mn, USD50mn was raised via QIP. It plans to

utilise the proceeds to: (i) scale up subscriber base; (ii) seed boxes in Phase 3 and 4;

and (iii) invest USD50mn in broadband services.

Outlook and valuations: Positive; maintain ‘BUY’

Apart from its digital base of ~5mn in Phases 1 and 2, DEN has a huge potential

subscriber base of ~6mn in Phases 3 and 4. At CMP, the stock is trading at P/E of 10.9x

and 7.2x FY14E and FY15E, respectively. We maintain ‘BUY’ and rate it ‘Sector

Performer’ with a TP of INR306.

RESULT UPDATE

DEN NETWORKS Revenue gets activation boost

EDELWEISS 4D RATINGS

Absolute Rating BUY

Rating Relative to Sector Performer

Risk Rating Relative to Sector Medium

Sector Relative to Market Overweight

MARKET DATA (R: DENN.BO, B: DEN IN)

CMP : INR 214

Target Price : INR 306

52-week range (INR) : 239 / 88

Share in issue (mn) : 146.5

M cap (INR bn/USD mn) : 31/ 554

Avg. Daily Vol.BSE/NSE(‘000) : 392.4

SHARE HOLDING PATTERN (%)

Current Q3FY13 Q2FY13

Promoters *

48.7 53.2 53.2

MF's, FI's & BK’s 4.2 2.4 2.4

FII's 20.8 13.7 13.7

Others 26.2 30.7 30.7

* Promoters pledged shares

(% of share in issue)

: NIL

PRICE PERFORMANCE (%)

Stock Nifty

EW Media

Index

1 month (10.3) 0.9 4.8

3 months (25.9) 5.1 4.3

12 months 61.3 21.6 63.1

Abneesh Roy

+91 22 6620 3141

[email protected]

Alankar Garude

+91 22 6623 3301

[email protected]

India Equity Research| Media

June 3, 2013

Financials (INR mn)

Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13 FY14E FY15E

Revenue 2,714 3,216 (15.6) 2,371 14.5 8,965 12,917 17,742

EBITDA 818 305 167.9 545 50.0 2,128 2,809 4,333

Net profit 173 48 263.7 171 1.2 902 853 1,521

Dil. EPS (INR) 1.3 0.4 1.3 5.8 5.7 10.6

EV/EBITDA (x) 13.5 10.9 7.2

ROAE (%) 11.8 9.6 14.6

*Rev. is not comparable YoY due to change in accounting (MediaPro rev. is now reported on net basis)

Media

2 Edelweiss Securities Limited

Conference call: Key highlights

Digital subscribers: Total digital subscribers are 5mn. The company added 2mn subscribers

in Phase 1 and 3mn in Phase 2. DEN added 1.07mn subscribers in Q4FY13.

Fund raising: DEN raised USD160mn fresh equity in May 2013. Goldman Sachs invested

USD110mn and USD50mn was raised through QIP. DEN plans to utilise the proceeds to: (1)

scale up subscriber base; (2) utilise money in Phases 3 and 4; and (3) invest USD50mn in

broadband services.

Activation revenue: DEN’s activation revenue stood at INR540mn in Q4FY13 (INR500 per

subscriber). For FY13, activation revenue stood at INR1,450mn.

Content cost: Management expects 15-17% YoY growth in content cost in FY14.

Phase 3: Phase 3 seeding in a major way will start from Q3FY14. Management expects good

traction in view of Phase 3 and 4. Also, adjoining cities of Phase 3 and 4 are being targeted

even now.

Carriage revenue: Currently, no carriage fee is shared with LCOs and the company does not

intend to share it in the future. Carriage income stood at 47% of total revenue in FY13.

Billing system: Currently, average net billing from LCOs is ~INR50. Management expects this

to increase to INR90-100 over the next three to four months. In Delhi, the entertainment

tax is borne by MSOs while no decision has been taken yet in Mumbai.

Set top box regulations: TRAI’s regulation to rent out STB will help increase consumer base

in Phase 3 and 4. This will also increase affordability at the bottom of the pyramid. However,

it still needs to be seen how the process is implemented. Also, cash flow for cable players

will become better in this.

TRAI 10 + 2 min regulation: The regulation has given an opportunity to broadcasters to

raise ad prices. Already, ad prices have increased 25-30% for many channels.

Broadband: DEN is planning to enter the broadband market by investing USD50mn from

fund raising proceeds. It will be targeting Tier I and II cities initially, and based on the

success in these markets, it is planning further expansion.

Capex: DEN is looking to digitise 6mn subscribers. Hence, till end of Phase 3, investment

requirement will be INR6bn. Also, in FY14, investment in broadband will be INR1.5bn and

other capex requirement will be INR500mn.

Balance sheet: DEN’s consolidated gross debt stands at INR7.5bn and net debt at INR3.5bn

at end FY13 (cash balance of INR4bn). Gross debt for the cable business stands at

INR7.25bn and net debt at INR3.06bn.

Debt/Equity: As on March 2013, D/E ratio stood at 0.8x. However, post fund raising, the

D/E will improve to 0.4x.

Finance cost: Finance cost increased by INR40mn YoY due to additional boxes being

ordered from Cisco.

DEN Networks


Chart 1: Revenue got activation revenue boost

Chart 2: Surge in EBITDA margin (unadjusted) was aided by high revenue

Chart 3: PAT margins dip slightly QoQ due to high tax and impairment of INR31.2mn

Source: Company, Edelweiss research

1,559

2,019

2,479

2,940

3,400

3,860

Q1

FY

10

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(IN

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Net sales

5.0

11.4

17.8

24.2

30.6

37.0

143

311

479

646

814

982

Q1

FY

10

Q2

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Q3

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(%)

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EBITDA EBITDA margin (%)

0.0

1.8

3.6

5.4

7.2

9.0

14

49

84

119

154

189

Q1

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Adjusted net profit PAT margin (%)

Media


Other key developments

TRAI prescribes standard tariff packages for STBs

Telecom Regulatory Authority of India (TRAI) has issued two tariff orders which prescribe

standard tariff packages for set top boxes for DAS and consumer premises equipments for

DTH service providers. The objective of this order is to make available STBs and CPE at a

reasonable price while protecting the interests of service providers. The order contains four

options that can be provided to consumers with different rentals and security deposit plans.

The standard tariff package is to be mandatorily provided for by DTH and cable TV

operators. As per the order, DAS service providers can provide STBs at a monthly rent of

INR55.66 or INR50.66 (excluding taxes) if the security deposit is INR400 and INR800,

respectively. For DTH service providers, the monthly rent for the CPE can be offered at a

rental of INR71.75 per month and INR65.50 per month if the security deposit is INR500 and

INR1,000, respectively. DAS service providers can offer STBs at a monthly adjustable rent of

INR46.80 or INR32.93 if the security deposit is INR400 and INR800, respectively, while DTH

service providers can provide STBs at a monthly adjustable rent of INR60.66 and INR43.32 if

the security deposit is INR500 and INR1,000, respectively.

Outlook and valuations: Positive; maintain ‘BUY’

DEN Networks (DEN) is one of the best placed MSOs to capitalise on the huge opportunity

thrown up by mandatory digitisation. In a short span of ~4.5 years, DEN garnered a

subscriber universe of ~11mn, amongst the highest in the industry and is also the first

national MSO to turn profitable. DEN has successfully adopted the model of consolidation

through secondary acquisitions (similar to US major Comcast’s strategy). DEN also has a

~25% stake in MediaPro JV, a key differentiator from other MSOs. The hike in FDI limit also

opens the door to rope in a strategic foreign partner. Apart from its digital base of ~5mn in

Phases 1 and 2, DEN has a huge potential subscriber base of ~6mn in Phases 3 and 4. We

assign an EV/EBITDA target of 10x (FY15E, unchanged) to DEN, which leads to a target price

of INR306. At CMP, the stock is trading at EV/EBITDA of 10.9x FY14E and 7.2x FY15E.

DEN Networks


Table 1: DEN’s presence in Phase 2 cities

Source: Census 2011, Company websites, Edelweiss research

City State State government Hathway DEN Siti Cable IMCL ZEE Sun TV

Bengaluru Karnataka Congress � � � � � �

Hyderabad Andhra Pradesh Congress � � � � �

Jaipur Rajasthan Congress � � � �

Ahmedabad Gujarat BJP � � �

Surat Gujarat BJP � � � �

Ludhiana Punjab Akali Dal � � �

Pune Maharashtra Congress � � �

Lucknow Uttar Pradesh SP � � �

Kanpur Uttar Pradesh SP � � �

Nagpur Maharashtra Congress � � �

Indore Madhya Pradesh BJP � � � �

Thane Maharashtra Congress � � � �

Bhopal Madhya Pradesh BJP � � �

Visakhapatnam Andhra Pradesh Congress � �

Pimpri-Chinchwad Maharashtra Congress � � �

Patna Bihar JDU � � �

Vadodara Gujarat BJP � � � �

Ghaziabad Uttar Pradesh SP � �

Agra Uttar Pradesh SP � �

Nashik Maharashtra Congress � � � �

Faridabad Haryana Congress � � � � �

Meerut Uttar Pradesh SP � �

Rajkot Gujarat BJP � � �

Kalyan-Dombivli Maharashtra Congress � � � �

Varanasi Uttar Pradesh SP � � �

Srinagar J&K J&K NC �

Aurangabad Maharashtra Congress � �

Amritsar Punjab Akali Dal � �

Navi Mumbai Maharashtra Congress � � � � �

Allahabad Uttar Pradesh SP � � � �

Ranchi Jharkhand President's rule � � �

Coimbatore Tamil Nadu AIADMK �

Jabalpur Madhya Pradesh BJP � �

Jodhpur Rajasthan Congress � �

Chandigarh Chandigarh Union Territory � � �

Howrah West Bengal Trinamool Congress � � � �

Solapur Maharashtra Congress � �

Mysore Karnataka Congress � � � � �

Total 25 cities 24 cities 16 cities 14 cities 37 cities 5 cities

Presence of MSO Sizeable presence

Media


Fig. 1: Solo ads by DEN

Source: Company

Source: Company

Performance of Hathway and Siti Cable in Q4FY13

Hathway Cable & Datacom’s (Hathway) Q4FY13 numbers were well ahead of our estimate

due to strong surge in activation revenue (INR876mn). Other key positives were: (1) robust

subscriber addition at 1.5mn (seeded ~0.73mn in Q3FY13); (2) huge 2,106bps YoY EBITDA

margin expansion in spite of 27.6% YoY jump in pay channel costs; and (3) net profit of

INR283mn after nine quarters of losses. The only key concern was jump in interest costs to

INR141mn (up 23% QoQ) due to substantial increase in borrowings (to fund set top boxes).

DEN Networks


Siti Cable’s total revenue surged ~63% YoY to INR1,413mn in Q4FY13. EBITDA catapulted

from INR223mn in Q4FY12 to INR885mn in Q4FY13. Siti Cable has initiated subscriber-wise

billing in DAS cities. The company has also expanded in Patna, Guwahati, Pune, Indore,

Jaipur, Bhopal, Jabalpur and Ujjain. As of FY13 end, Siti Cable had more than 3mn digital

subscribers. Out of the 3mn digital subscribers, 2mn came from Phase 1 and 1mn from

Phase 2. Siti Cable seeded ~0.8mn boxes in Q4FY13. The company expects to seed 3mn

boxes in FY14.

Hathway Standalone quarterly results

All values are in INR mn Q4FY13 Q4FY12 % growth Q3FY13 % growth FY13 FY14E FY15E

Revenue 2,312 1,355 70.7 1,544 49.7 11,325 15,666 18,562

Total Expenditure 1,427 1,121 27.3 1,189 20.0 8,587 12,592 14,515

Pay channel cost 495 388 27.6 430 15.2 4,325 6,611 7,536

Employee cost 105 77 36.8 108 (3.0) 961 1,676 2,005

Other operating expenses 827 657 25.9 651 27.0 3,301 4,305 4,974

EBITDA 885 233 279.5 355 149.5 2,738 3,073 4,047

Depreciation/Amortisation 442 272 62.6 286 54.3 1,661 2,237 2,601

EBIT 443 (38) NM 68 NM 1,078 836 1,446

Other Income 26 63 (58.5) 14 91.7 115 172 176

Interest 141 113 24.2 114 23.1 602 786 984

Exceptional items 103 (21) (582.9) 27 283.6 36 36 36

PBT 283 (68) NM (74) NM 555 187 602

Tax expense - - - 179 237 281

Core PAT 283 (68) NM (74) NM 376 (51) 320

Minority Interest 249 148 183

Extraordinary item - - - 30 - -

Profit after tax 283 (68) NM (74) NM 157 (199) 137

No. of shares (mn) 143 143 143 143 143 143

EPS (INR) fully diluted 2.0 (0.5) (0.5) 0.9 (1.4) 1.0

as % of net revenues 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1

Pay channel cost 21.4 28.6 27.8 38.2 42.2 40.6

Employee cost 4.5 5.7 7.0 8.5 10.7 10.8

Other operating expenses 35.8 48.5 42.2 29.1 27.5 26.8

EBITDA 38.3 17.2 23.0 24.2 19.6 21.8

Net profit 12.2 (5.0) (4.8) 3.3 (0.3) 1.7

Note: Quarterly numbers are on standalone basis

Media


Siti Cable consolidated financials

All values in INR mn Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 YoY QoQ

Net Sales 784 891 872 853 1,097 933 1,201 1,403 64.6 16.8

Other operating income 14 2 - 13 19 2 32 10 (22.0) (68.8)

Total Revenues 798 893 872 865 1,116 935 1,233 1,413 63.3 14.6

Total Expenditure 761 889 911 888 858 851 1,045 1,244 40.0 19.0

(Increase) / Decrease In Stocks (4) 11 - 36 (3) 1 7 1 (98.3) (91.2)

Purchase of trading Goods 3 3 - (33) 12 20 65 (61) NA NA

Other operating expenses 699 807 841 817 772 761 893 1,211 48.2 35.7

Employee Cost 64 69 70 68 77 69 80 93 37.0 16.0

EBITDA 37 4 (40) (23) 258 85 188 169 (834.4) (9.9)

Other Income 6 69 85 54 19 104 15 91 67.7 523.2

Interest 151 144 129 142 176 195 251 258 81.3 2.7

Exceptional Items 233 4 3 3 - - - 5 78.9 NA

PBDT (341) (76) (86) (114) 102 (6) (49) (3) NA NA

Depreciation 70 77 73 84 91 117 142 213 154.4 50.0

PBT (412) (153) (159) (198) 11 (123) (191) (216) NA NA

Prior period expense (52)

Tax 8 (12) (11) 45 59 3 (5) (11) NA NA

Profit After Tax (420) (142) (147) (242) (48) (126) (238) (205) NA NA

Net Profit (after Extraord. Items) (420) (142) (147) (242) (48) (126) (238) (205) NA NA

Minority Interest (14) (4) (7) 4 - (5) 1 73 NA NA

Consolidated Net Profit (406) (138) (140) (246) (48) (122) (238) (278) NA NA

EBITDA margin (%) 5 0 (5) (3) 23 9 15 12

% change

DEN Networks


DEN Networks

Financial snapshot (INR mn)

Year to March Q4FY13 Q4FY12 % change Q3FY13 % change FY13 FY14E FY15E

Net revenues 2,714 3,216 (15.6) 2,371 14.5 8,965 12,917 17,742

Pay channel cost 718 1,876 (61.7) 829 (13.4) 2,863 3,292 3,720

Staff costs 290 211 37.2 221 31.0 988 1,111 1,206

Other operating expenses 889 824 8.0 776 14.6 2,986 5,705 8,482

Total expenditure 1,897 2,911 (34.8) 1,826 3.9 6,837 10,108 13,409

EBITDA 818 305 167.9 545 50.0 2,128 2,809 4,333

Depreciation & amortization 273 147 85.2 210 29.8 811 1,357 1,844

EBIT 545 158 245.0 335 62.7 1,317 1,451 2,489

Other income 47 36 28.6 47 (0.4) 381 258 266

Interest 164 83 97.6 117 39.8 471 525 583

Profit before tax 397 112 255.8 265 49.8 1,228 1,184 2,172

Tax 137 50 171.4 69 97.8 294 332 652

Core profit 261 61 325.1 196 33.0 902 853 1,521

Minority interest 88 14 538.7 25 250.0 156 90 95

Profit after tax and min. int. 173 48 263.7 171 1.2 746 763 1,426

No. of shares (mn) 134 130 134 134 134 134

Diluted EPS (INR) 1.3 0.4 254.1 1.3 1.2 5.8 5.7 10.6

Tax Rate 34.4 45.1 26.0 24.0 28.0 30.0

As % of net revenues

Pay channel cost 26.4 58.3 35.0 31.9 25.5 21.0

Employee cost 10.7 6.6 9.3 11.0 8.6 6.8

Other operating expenses 32.8 25.6 32.7 33.3 44.2 47.8

EBITDA 30.1 9.5 23.0 23.7 21.7 24.4

Reported net profit 6.4 1.5 7.2 10.4 6.6 8.6

*Rev. is not comparable YoY due to change in accounting (MediaPro rev. is now reported on net basis)


Media

Company description

DEN Networks (DEN) is one of the leading MSOs in the Indian TV distribution industry, with

~11mn subscribers. The company is present in 160 cities and towns. 100% of the homes

passed are digital-ready and only require additional STBs. Incorporated in July 2007, DEN is

promoted by Mr. Sameer Manchanda, who has been associated with the Indian TV industry

for over two decades. With an experienced management team, DEN’s growth strategy has

been to acquire majority interests in smaller MSOs and consolidate its position. In 2010, it

became the first MSO to post positive PAT. The company has partnered with STAR, ZEE and

Turner in the MediaPro JV. MediaPro is India’s largest content aggregation and distribution

company offering over 70 channels including all STAR, ZEE, Turner and NDTV channels.

DEN’s digital cable TV service is backed by 19 digital head-ends.

Investment theme

DEN has a potential subscriber base of ~6mn in Phase 3 and Phase 4. Converting its analog

subscribers to digital will provide it a huge opportunity to increase subscription revenue

due to lower under-declaration and higher ARPU.

Key risks

DTH players can leverage on first mover, stronger brand.

Fund raising may be required in subsequent phases.

Intense competition may limit ARPU growth.


DEN Networks

Financial Statements

Income statement (INR mn)

Year to March FY12 FY13 FY14E FY15E

Net revenue 11,295 8,965 12,917 17,742

Pay channel cost 6,618 2,863 3,292 3,720

Employee costs 931 988 1,111 1,206

Operating expenses 2,923 2,986 5,705 8,482

EBITDA 822 2,128 2,809 4,333

Depreciation & Amortization 538 811 1,357 1,844

EBIT 284 1,317 1,451 2,489

Other income 271 381 258 266

Interest expenses 269 471 525 583

Profit before tax 286 1,228 1,184 2,172

Provision for tax 100 294 332 652

Net profit 186 934 853 1,521

Profit After Tax 186 902 853 1,521

Minority interest 45 156 90 95

Share in profit of associates 3 - - -

Profit after minority interest 143 746 763 1,426

Shares outstanding (mn) 134 134 134 134

Diluted EPS (INR) 1.1 5.8 5.7 10.6

Common size metrics


Pay channel cost 58.6 31.9 25.5 21.0

Employee expenses 25.9 33.3 44.2 47.8

EBITDA margins 7.3 23.7 21.7 24.4

Net profit margins 1.6 10.4 6.6 8.6

Growth ratios (%)


Revenues 10.5 (20.6) 44.1 37.4

EBITDA (8.7) 158.8 32.0 54.3

Net profit (58.1) 402.7 (8.6) 78.3

EPS (62.9) 444.0 (1.9) 86.9

Key Assumptions

Year to March FY12 FY13E FY14E FY15E

Macro

GDP(Y-o-Y %) 6.2 5.0 6.0 7.0

Inflation (Avg) 8.9 7.4 5.2 6.0

Repo rate (exit rate) 8.5 7.5 6.8 6.0

USD/INR (Avg) 48.0 54.5 55.0 53.0

Company

Sales assumptions

Digital subscriber additions (mn) 0.2 3.5 1.7 1.5

Total paying digital subs (mn) 0.1 1.3 3.4 6.0

Analog ARPU (INR) 160 160 160 170

Digital ARPU (INR) 180 180 190 200

Digital ARPU - multi TV (INR) 90 90 95 100

Broadband subscribers (mn) 0.2 0.2 0.2 0.2

Placement/carr. rev growth (%) 10.5 (15.0) (20.0) (20.0)

Broadband revenue (% of rev.) 1.9 2.3 1.7 1.3

Cost assumptions

Pay channel costs (% of rev.) 58.6 31.9 25.5 21.0

LCO commission (% of digi rev) - 40.0 37.0 35.0

Personnel cost (% of rev.) 8.2 11.0 8.6 6.8

Repairs (% of rev) 3.7 5.5 4.6 4.2

Ad & publicity expenses (% of rev.) 4.4 8.8 7.8 7.6

Financial assumptions

Capex (INR mn) 1,214 2,987 4,246 4,100

Debtor days 93 96 92 92

Inventory days - 4 4 4

Payable days 131 150 146 142

Cash conversion cycle (days) (38) (50) (50) (46)

Interest rate on o/standing debt (%) 10.5 11.0 11.0 11.0

Depreciation as % of gross block 10.7 10.5 10.5 10.5


Media

Peer comparison valuation

Market cap Diluted PE (X) EV/EBITDA (X) EV/Sales (X)

Name (USD mn) FY14E FY15E FY14E FY15E FY14E FY15E

DEN Networks 554 37.7 20.1 10.9 7.2 2.4 1.7

Dish TV India 1,218 - - 10.7 8.1 3.0 2.4

Hathway Cable & Datacom 708 - - 15.9 12.5 3.1 2.7

Sun TV Network 2,896 18.3 15.2 8.9 7.2 6.8 5.6

Zee Entertainment Enterprises 3,830 27.0 22.9 17.9 14.6 5.1 4.5

AVERAGE - 17.3 11.8 12.3 9.5 3.7 3.1

Source: Edelweiss research

Cash flow metrics


Operating cash flow 852 2,580 3,098 4,280

Investing cash flow (1,299) (2,784) (4,217) (4,127)

Financing cash flow 740 1,212 525 (583)

Net cash flow 293 1,008 (594) (430)

Capex (1,214) (2,987) (4,246) (4,100)

Profitability & efficiency ratios


ROAE (%) 2.5 11.8 9.6 14.6

ROACE (%) 2.8 10.9 10.2 15.6

Inventory day - 4 4 4

Debtors days 93 96 92 92

Payable days 131 150 146 142

Current ratio 2.1 2.1 1.6 1.3

Debt/EBITDA 3.1 2.0 1.9 1.2

Debt/Equity 0.3 0.5 0.6 0.5

Adjusted debt/equity 0.3 0.5 0.6 0.5

Interest coverage 1.1 2.8 2.8 4.3

Operating ratios


Total asset turnover 1.1 0.7 0.9 1.1

Fixed asset turnover 4.9 2.5 2.1 2.0

Equity turnover 1.4 1.1 1.4 1.7

Valuation parameters


Diluted EPS (INR) 1.1 5.8 5.7 10.6

Y-o-Y growth (%) (62.9) 444.0 (1.9) 86.9

CEPS (INR) 4.5 11.9 15.8 24.4

Diluted PE (x) 201.0 37.0 37.7 20.1

Price/BV (x) 3.6 3.3 3.0 2.6

EV/Sales (x) 2.5 3.2 2.4 1.7

EV/EBITDA (x) 33.9 13.5 10.9 7.2

FCFPS (INR) (2.8) (3.1) (8.8) 1.4

Balance sheet (INR mn)

As on 31st March FY12 FY13E FY14E FY15E

Equity capital 1,330 1,330 1,330 1,330

Reserves & surplus 6,748 7,403 8,165 9,591

Shareholders funds 8,078 8,732 9,495 10,921

Minority interest (BS) 616 772 862 957

Short term debt 665 750 800 800

Long term debt 1,902 3,500 4,500 4,500

Borrowings 2,567 4,250 5,300 5,300

Deferred tax liability (202) (202) (202) (202)

Sources of funds 11,059 13,553 15,456 16,976

Tangible assets 2,566 4,647 7,714 10,184

Intangible assets 267 445 445 445

CWIP (incl. intangible) 755 850 900 980

Total net fixed assets 3,588 5,942 9,060 11,609

Goodwill on consolidation 2,932 2,932 2,932 2,932

Non current investments - - - -

Current Investments 223 223 223 223

Cash and equivalents 3,006 4,014 3,420 2,990

Inventories - 31 36 41

Sundry debtors 2,819 2,358 3,256 4,472

Loans and advances 2,012 2,012 2,012 2,012

Other current assets 430 430 430 430

Total current assets (ex cash) 5,485 5,055 5,957 7,178

Trade payable 2,593 1,176 1,317 1,447

Others current liabilities 1,359 3,213 4,596 6,285

Total current liabilities & 3,951 4,389 5,913 7,732

Net current assets (ex cash) 1,533 665 44 (554)

Uses of funds 11,059 13,553 15,456 16,976

Book value per share (INR) 60.3 65.2 70.8 81.5

Free cash flow (INR mn)


Net profit 143 746 763 1,426

Depreciation 538 811 1,357 1,844

Deferred tax (71) - - -

Others 230 154 357 412

Gross cash flow 841 1,711 2,477 3,681

Less: Changes in WC (11) (868) (621) (598)

Operating cash flow 852 2,580 3,098 4,280

Less: Capex 1,214 2,987 4,246 4,100

Free cash flow (363) (408) (1,148) 180


DEN Networks

Perc. Holding Perc. Holding

College Retirement Equities Fund 4.22 Standard Chartered Trust 3.99

Tara India Holdings A Ltd 1.88 Emerging India Focus Funds 1.67

Il&FS Trust Co Ltd 1.59 Blue Eye Entertainment 1.4

Life Insurance Corp Of India 1.29 L&T Investment Management Ltd 1.26

Kumaraswamy Anitha 1.21 Reliance Strategic Invstmt 1.02

*as per last available data

Holding – Top10

Insider Trades Reporting Data Acquired / Seller B/S Qty Traded

*in last one year

Bulk Deals Data Acquired / Seller B/S Qty Traded Price

No Data Available

*in last one year

Additional Data

Directors Data

Mr. Sameer Manchanda Chairman & MD Mr. Shahzaad Siraj Dalal Nominee Director

Mr. Krishna Kumar Alternate Director to Mr. Shahzaad Siraj Dalal Mr. Ajaya Chand Non Executive, Independent Director

Mr. Robindra Sharma Non Executive, Independent Director Mr. Atul Sharma Non Executive, Independent Director

Auditors - M/s. Deloitte Haskins & Sells

*as per last annual report


Company Absolute

reco

Relative

reco

Relative

risk

Company Absolute

reco

Relative

reco

Relative

Risk

DEN Networks BUY SP M Dish TV India BUY SP M

Hathway Cable & Datacom BUY SO M Jagran Prakashan BUY SP M

PVR BUY SP M Sun TV Network BUY SP M

Zee Entertainment Enterprises BUY SO M

RATING & INTERPRETATION

ABSOLUTE RATING

Ratings Expected absolute returns over 12 months

Buy More than 15%

Hold Between 15% and - 5%

Reduce Less than -5%

RELATIVE RETURNS RATING

Ratings Criteria

Sector Outperformer (SO) Stock return > 1.25 x Sector return

Sector Performer (SP) Stock return > 0.75 x Sector return

Stock return < 1.25 x Sector return

Sector Underperformer (SU) Stock return < 0.75 x Sector return

Sector return is market cap weighted average return for the coverage universe

within the sector

RELATIVE RISK RATING

Ratings Criteria

Low (L) Bottom 1/3rd percentile in the sector

Medium (M) Middle 1/3rd percentile in the sector

High (H) Top 1/3rd percentile in the sector

Risk ratings are based on Edelweiss risk model

SECTOR RATING

Ratings Criteria

Overweight (OW) Sector return > 1.25 x Nifty return

Equalweight (EW) Sector return > 0.75 x Nifty return

Sector return < 1.25 x Nifty return

Underweight (UW) Sector return < 0.75 x Nifty return


DEN Networks

Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098.

Board: (91-22) 4009 4400, Email: [email protected]

Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206

Nischal Maheshwari Co-Head Institutional Equities & Head Research [email protected] +91 22 4063 5476

Nirav Sheth Head Sales [email protected] +91 22 4040 7499

Coverage group(s) of stocks by primary analyst(s): Media

DEN Networks, Dish TV India, Hathway Cable & Datacom, Jagran Prakashan, PVR, Sun TV Network, Zee Entertainment Enterprises

Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 120 49 17 186

* - stocks under review

Market Cap (INR) 118 56 12

Date Company Title Price (INR) Recos

Recent Research

31-May-13 Jagran

Prakashan

Soft quarter; needs to chant

consolidation mantra;

Result Update

85 Buy

30-May-13 Hathway Cable

& Datacom

Activation boom spurs

growth; Result Update

280 Buy

29-May-13 PVR Minor speed bump, but long

term picture intact;

Result Update

341 Buy

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to


Media

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DEN Networks

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