Emkay's research report on PVR
PVR has agreed to buy DT Cinema, which currently operates 29 screens with ~6,000 seats across 8 properties in the NCR and Chandigarh
In next 12 months, DT will add 10 new screens at two properties in NCR. Post-acquisition, PVR will have a presence in 44 cities with 115 multiplexes and 506 screens
On one-year forward EV/EBITDA basis, DT Cinema is valued at 20% premium to PVR’s valuations. As per our calculation, PVR has valued DT at 12x EV/EBITDA, based on our EBITDA estimate for DT Cinemas of Rs417mn for FY17E
We believe this acquisition would further strengthen PVR’s position in NCR. In our view, this deal was crucial for PVR, as in FY15, Satyam Cinemas was acquired by Inox and losing this deal could have strengthened position of competitors. We remain positive on long term prospective of the exhibition business. Retain BUY with target price of Rs 780
"Valuations look expensive on EV/Screen, however, on EV/EBITDA basis, PVR has not paid meaningful premium as compared to it’s on year forward valuations. Near term pain for the company would be high leverage on balance sheet (as we assume Rs1000mn payment would be debt funded), while the deal is positive from long term perspective. Premium valuations can be justified by 1) it’s a strategic investment to further strengthen its position in NCR, 2) premium locations of DT cinemas would add positively to advertisement revenues in long term, 3) high market share would drive better negotiating power with film distributors, 4) leaves limited room for any other large multiplex chain to expand inorganically. We have not incorporated financials of DT Cinema in our financials", says Emkay Global Financial Services research report.
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