Sharekhan's research report on PVR
PVR-Inox merger is expected to provide significant benefits from market share gains from better ability to penetrate tier 2-3 regions to synergies that would offer substantial bargaining power over the entire ecosystem including content producers, technology service providers, real estate developers and customers. PVR’s management had guided for annual synergies of Rs. 225 crores merged entity over the next 12-24 months. In terms of revenue synergy, F&B would to be key focus area post-merger together with box office synergy and programming synchronisation, while on the cost front, the company will be focussing on supply chain synergy and reduction in F&B costs. After a dismal show in 2022 due to poor performance of Hindi film and fewer Hollywood releases, the movie line-up for 2023 is promising across Hindi, English and other Regional language films. Greater acceptance of multilanguage content with Pan India releases is also expected to aid sales and drive footfalls and occupancy levels.
Outlook
We maintain a Buy on PVR with a revised PT of Rs. 1800 (based on FY25E EV/EBITDA of 11x on merged entity EBITDA estimate of ~Rs. 1700 crore) given the likelihood of synergy benefits on revenues and cost front over the medium term, promising content pipeline and potential market share gains from penetration in tier 2-3 regions.
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