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Goldman Sachs upgrades PVR to buy, raises target price to Rs 1,800

The global financial firm said even though the operating environment for cinemas remains volatile, it sees a positive risk-reward for PVR.

January 06, 2021 / 05:53 PM IST
Representative image | Source: Pixabay

Representative image | Source: Pixabay

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Goldman Sachs has upgraded the stock of PVR to a buy from a neutral, raising the target price to Rs 1,800 from Rs 1,300.

Shares of PVR jumped 3.5 percent in the first half of today's session.

The global financial firm said even though the operating environment for cinemas remains volatile, it sees a positive risk-reward for PVR.

"Demand across various leisure activities in India has started to see a robust pick-up in recent weeks. Coupled with the recent COVID-19 vaccine approvals, we believe earnings visibility for PVR is now higher," said Goldman Sachs.

"PVR’s valuation gaps vs history and peers are at discounts, and given our expectation of no structural changes to the movie-going industry for India, we believe the current stock price offers an attractive entry point into an asset with a very robust medium-term growth outlook (12 percent FY20-24E revenue CAGR)," it added.


Goldman expects PVR’s top-line to remain subdued during early CY21, but forecast a sharp recovery in H2CY21, with pre-COVID level revenues by Q4CY21.

The recovery, as per Goldman Sachs, will be led by bunched-up screen openings/movie releases, and market share wins from single screens.

The financial firm does not see OTT as a serious threat to multiplex players like PVR.

"OTT is unlikely to have a material earnings impact on PVR, and data from China indicates box office has the potential to recover to pre-COVID levels; we thus do not expect cinema admissions per capita in India to structurally reset lower due to the pandemic," said Goldman Sachs.

The financial firm believes some of PVR’s recent cost control efforts can be sustained, and raise FY22-24E revenue/EBITDA estimates by 1-3 percent.

"With our CY22E EBITDA estimate 40 percent higher than in CY19 (22 percent FY20-23E CAGR), we see the potential for PVR to re-rate to historical average multiples. The market seems to be pricing in PVR not reaching pre-COVID level revenues until Q3CY22, which we think is unlikely," said Goldman Sachs.

"In our bear case (delayed demand; higher costs), we see 22 percent downside to PVR’s share price, while in our bull case (faster recovery; higher market share), we see 45 percent upside," said Goldman Sachs.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Moneycontrol News
first published: Jan 6, 2021 01:55 pm

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