Buy PVR; target of Rs 1516: Edelweiss

Edelweiss' research report on PVR

PVR’s overall ATP increased merely 1% and footfalls rose only 1% impacted by weak content. Film hire (as % of reported NBOC) jumped 120bps YoY to 46.2% in Q2FY18 due to reduction in NBOC on account of discontinuation of tax holidays and uncertainty over other deductions (theatre maintenance charges etc.) under the new GST regime. Even though SPH increased 8%, net F&B revenue rose only 2% on account of higher tax on F&B sales under GST (18% versus 12% earlier).

Outlook

We remain enthused by PVR’s pricing power with regards ATP, F&B and advertising. We expect the company to be key beneficiary of anticipated uptick in urban consumption. Screen expansion and movie line up will be key monitorables. We maintain ’BUY/SO’ with target price of INR 1,516 (32x FY19E EPS). At CMP, the stock is trading at 30.0x FY19E EPS.

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