>Hathway Cable & Datacom Ltd. (ANTIQUE)

Key highlights
■ Digitising opportunity: The company is acknowledged as the pioneer in the yet consolidating the Indian cable industry with 20% digital subscriber base of the expected 10m pass through homes in FY12e. With a demonstrated track record it is best-positioned to drive the digitisation move, reaping the benefits of scale and entertainment consumption spend.

■ Cross selling monetisation: Huge broadband opportunity - Hathway’s leadership in digital cable has the potential to tap the huge unserved broadband market. The cross-selling opportunity of the existing digital infrastructure augurs well for profitability with the added competitive advantage of last mile connectivity through local operators.

■ Valuation and outlook
The digitisation of the cable subscriber base is very capital intensive and the landscape is still evolving with scale being the differentiator. With ~8.2m pass through homes, we expect revenue CAGR of 19.3% over FY10-12e with 23.8% CAGR in revenue generating units. The scale would help in expanding EBITDA margins to 31% in FY12e aiding EBITDA CAGR of 48.8%. The global media companies trade at EV/EBITDA to growth ratio of ~0.7-0.9x, but we are valuing the company at a ratio of 0.4x, considering the nascent stage of the industry and future funding requirement at 19.5x FY11e EV/EBITDA on post money basis. We have a price objective of INR309, indicating an upside of 28.8% and 16.6% from lower and upper band of issue price, respectively.

To read the full report: HATHWAY CABLE