Dish TV India Limited (Dish) announced its Q1 FY2012 results on 20 July 2011. The company's revenues came in line with our as well as Bloomberg consensus estimates.

Additionally, the company positively surprised on the bottom line front with losses coming considerably below expectations. Lower than anticipated selling and distribution expenses remained the key contributor for paring losses.

We continue to follow Discounted Cash Flow (DCF) methodology to value the stock of Dish. To arrive at Weighted Average Cost of Capital (WACC), we used Capital Asset Pricing Model (CAPM) for calculating cost of Equity.

Furthermore, we raised the long term Cost of Debt for the company, from 7.0% earlier, led by recent consecutive hikes in interest rates by Reserve Bank of India. Based on Risk Free Rate of 8.30%, Market Risk Premium of 5.52%, and Beta of 1.18x, the company's cost of equity stood at 14.81%.

For debt, we assigned a post tax cost of 8.50%. Coupled with these costs and desired Debt-to-Equity ratio of 1.5x, we arrived at WACC of 11.03%. This is higher than our previous calculated WACC of 9.89%. Furthermore, we assumed a terminal growth rate of 2.5% for the stock post FY2017E.

With this, we arrived at a target price of INR 96.80 for Dish, representing an upside of 24.8% over the current market price of INR 77.55.

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