Buy PVR; target of Rs 1695: Edelweiss

Edelweiss' research report on PVR

PVR’s Q4FY18 revenue, EBITDA and PAT stood higher than our estimate, largely driven by increase in advertising income and ATP. Key positives: i) 31% YoY growth in LTL advertising income, the highest in past nine quarters; ii) 9% YoY LTL ATP growth; and iii) 11% YoY jump in LTL SPH. Key negative was the 2% YoY decline in LTL footfalls due to the dispute between digital service providers and producers in South India and non release of Padmaavat in some states. Though PVR had guided for ~67 new screens in FY18 (our estimate: 50 screens), delays in mall completion and regulatory approvals resulted in only 49 additions in FY18. Key monitorables: 1) rise in rental cost (due to competition); 2) PIL against Maharashtra government for carrying outside food inside theatres; and 3) LBT in Chennai. Initiatives like loyalty programme and technological upgradation of screens are long-term positives. Maintain ‘BUY’.

Outlook

We remain enthused by PVR’s pricing power and expect it to be key beneficiary of anticipated uptick in urban consumption. Screen expansion and movie line-ups are key monitorables. Rolling over to FY20E, we maintain ’BUY/SO’ with TP of INR1,695 (31x FY20E EPS). At CMP, the stock trades at 33.4x FY19E and 26.1x FY20E EPS.

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