November 06, 2015 / 15:37 IST
Edelweiss' research report on PVR PVR’s Q2FY16 revenue came in line, while PAT exceeded our estimates propelled by increase in other income. Key positives were: (i) 20% YoY surge in net box office revenue aided by blockbusters like Bajrangi Bhaijaan and Bahubali; (ii) 32% YoY jump in F&B revenue, driven by 10% LTL spend per head (SPH) growth; (iii) 4.5% reduction in F&B costs due to lower wastage and higher efficiency; and (iv) 470bps YoY jump in EBITDA margin, primarily owing to lower other expenditure (down 483bps YoY). The company will continue to benefit from strong content pipeline (Prem Ratan Dhan Payo, Dilwale and Tamasha in Q3FY16), massive expansion potential (470 screens pipeline in next 6 years), likely urban revival and possible implementation of GST. Maintain ‘BUY’. Extends stellar performance Ad revenue surged 13% YoY to INR461mn, while F&B revenue catapulted 32% YoY. Overall SPH stood at INR68 (INR74 in Q1FY16) due to mix of movies (regional content fared well in Q2FY16 versus Q1FY16), thus impacting EBITDA margins. However, overall SPH improved by 9% YoY. Footfalls per screen increased from 34,600 in Q2FY15 to 39,400 in Q2FY16 (up 14% YoY). Q3FY16 is also expected to be good similar to Q1FY16 due to upcoming star driven movies and festive season.
Q2FY16 conference call key takeaways Q3FY16 will be the best quarter for ad revenue. In Q2FY16, 29% revenues were from regional content, 16-17% from Hollywood content and Hindi content contributed the balance 55-56% of revenues. While 30% of the screens are on variable rental deals, 70% are on fixed rentals. In Q3FY16, 22 screens will be added. Other income jumped as: 1) PVR received income tax refund of INR25mn for previous years; and 2) the company earned interest income from maturity. Tax rate for FY16 is 20-22%.
Outlook and valuations: Positive; maintain ‘BUY’ We remain enthused by PVR’s dominance and expansion in exhibition business. We expect the company to be key beneficiary of the good content pipeline. Acquisition of DT Cinemas will be EPS accretive only by FY17. At CMP, the stock is trading at 33.9x and 21.6x FY16E and FY17E EPS, respectively. We maintain ‘BUY/Sector Outperformer’ with a target price of INR 977.For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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