Buy PVR; target of Rs 1983: Prabhudas Lilladher

Prabhudas Lilladher's research report on PVR

PVR reported better than expected performance with revenue beat of 7% and pre-IND AS EBITDA margin of 13.6% (PLe of 12.5%). Nonetheless, ad revenue recovery at 65% (over pre-COVID base) remains a disappointment. Given continued under-performance of Bollywood, we cut our footfall estimates by ~2% leading to a downward revision in EBITDA to the tune of ~2-3% over FY24E-FY25E. Nonetheless, Bollywood underperformance is not a structural issue and we remain confident of future prospects given 1) content slate for near term is healthy with movies like Pathaan, Shehzada, Bhola, Selfiee, Ant-Man and the WASP: Quantumania, Shazam, and John Wick in pipeline 2) rising pan-India acceptance of regional content 3) strong screen opening outlook and 4) sustenance in KPIs (ATP/SPH CAGR of 5%/10% respectively in 3QFY23 over pre-COVID base) with the exception of occupancy. Further, after having received the NCLT approval, proposed merger with Inox is expected to culminate in 4QFY23 and can act as a key rerating lever, in our view.

Outlook

We expect sales/EBITDA CAGR of 19%/24% over FY23-25E and retain BUY on the stock with a TP of Rs1,983 (earlier Rs2,005) after assigning EV/EBITDA multiple of 15.5x (no change) to merged entity.