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Broadband to be key growth driver ahead…

About the stock: GTPL Hathway (GTPL) is a leading MSO (No. 1 in terms of subscribers) offering cable television (CATV) and broadband services with a strong presence in Gujarat (No. 1 in terms of subscribers).

* Expansion into new states and digitisation has led to strong topline and earnings growth of ~27% and ~86% CAGR, respectively, over FY16-21

Q3FY22 Results: GTPL reported a muted operating performance

* Core (Ex-EPC) revenue grew 9.7% YoY to | 597.2 crore, driven by ~35% YoY growth in broadband revenues to | 105.4 crore, driven by 30,000 subscriber addition and 13.4% YoY growth in cable placement/carriage revenues at | 185.9 crore

* EBITDA was at | 133.5 crore with margins at 22.3%, up 50 bps YoY

* Reported PAT was at | 54.6 crore, up ~21% YoY, mainly aided by lower depreciation and higher other income

What should investors do? GTPL’s share price has grown by ~48% over the past five years (from ~| 179 in January 2017 to ~| 265 levels in January 2022).

* We maintain HOLD rating on the stock as cable growth is yet to pick up and we would monitor broadband trajectory ahead

Target Price and Valuation: We roll over to FY24 and value GTPL at | 290 i.e. 14x FY24E P/E

Key triggers for future price performance:

* The pace of broadband segment expansion both in terms of existing markets and new market entry

* Change in pricing share between LCOs and GTPL, currently lower than peer

* Implementation and impact of NTO 2, which will have implications for the overall channel pricing for broadcasters and, thus, their strategy ahead will be key for distribution/placement for GTPL

Alternate Stock Idea: Besides GTPL, we like Inox Leisure in the media sector

* A play on recovery of multiplex with strong balance sheet

* BUY with a target price of | 495

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