Hold PVR; target of Rs 1385: ICICI Direct

ICICI Direct's research report on PVR

PVR reported strong set of number riding on healthy content performance and aided by recently acquired SPI cinema acquisition consolidation (from 17th Aug, 2018). Q2FY19 reported revenue came in at Rs708.6 crore, up 27.6% YoY. For comparability with our estimates, Revenues (ex SPI) stood at Rs 652.7 crore, up 17.5% YoY and in line with our expectation of 653.12 crore. The PVR (ex SPI) ATP, stood at Rs211 ( vs our expectation of Rs210) and footfalls which came at 21.4 mn ( 14.4% YoY) driven by driven by healthy content. The Spend per head (SPH) decline by 3.3% YoY to Rs 88. Net box office collections (ex-SPI) came in at Rs 351.5 crore, up 17.4% YoY. F&B revenues (ex-SPI) came in at Rs 177.8 crore, up 25% YoY. The ad revenues (ex SPI) was at Rs 71.8 crore, up 13.2% YoY (better than our estimates of ~7%) but lower than Inox ( 18% YoY growth). Reported EBITDA came at Rs 123 crore, given SPI consolidation. EBITDA (ex SPI) was also higher at Rs 115.2 crore versus estimates of Rs 106.6 crore, given better than expected ad revenues. The reported margins came in at 17.4%, better than our estimates of 16.3%, also aided by SPI’s better margin profile of 20.8%. PAT came in at Rs 33 crore, on account of higher tax ( tax rate of 38.8% vs our expectations of 35%).

Outlook

PVR remains a key beneficiary of a thriving multiplex business, which is one of the proxies on rising urban discretionary consumption spends. The SPI deal is also an opportune move to capture favourable movie-viewing footfalls of southern India. The company’s proactive approach to allay public outrage through price rationalisation in Maharashtra is also a smart move. We now incorporate SPI into our estimates and valuations and but maintain HOLD on account of increased leverage (Net Debt/EBITDA of 2.7x currently) on account of increased capex & acquisition. We value it at 12x FY20E EV/EBITDA, arriving at a target price of Rs 1385.

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