Accumulate PVR; target of Rs 1131: Prabhudas Lilladher

Prabhudas Lilladher's research report on PVR

PVR's performance was marred (revenue/Ind-AS adjusted EBITDA miss by 8%62% respectively) by weak content (only 2 movies viz; Tanhaji and Baghi 3 crossed Rs1bn in box office collections during 4QFY20 versus ~4/5 movies in 4QFY19) and COVID-19 led shutdown (loss of revenue for 15-20 days without complete rationalization of fixed cost). We have drastically cut our sales/EBITDA estimates for FY21 and FY22 as 1) occupancy in 1HFY21 is likely to be negligible with a gradual recovery in 2HFY21 resulting in ~60% decline in footfalls over FY20 2) cautious screen expansion strategy (committed capex is only Rs0.5-1bn for FY21) to conserve cash is expected to keep growth under check and 3) rising instances of producers opting for OTT route can potentially disrupt the content pipeline. While we continue to maintain our positive stance on the multiplex space (low ticket consumer discretionary play) near term challenges with respect to fixed cost and liquidity management persist given the leveraged BS of PVR (D/E of 0.9x as of FY20).

Outlook

As a result, we downgrade the stock to ACCUMULATE (BUY earlier) effectively valuing it at EV/EBITDA multiple of 10x (earlier 8.5x; long period average is 12x) with a TP of Rs1,131 (Rs1,518 earlier).

PVR 13062020-prabhu

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