Hold PVR; target of Rs 1810: ICICI Direct

ICICI Direct's research report on PVR

PVR’s Q1FY20 topline beat was aided by better-than-expected growth in F&B and advertisement. F&B revenues at Rs 260.4 crore, up 28.4% YoY, were higher than expected 15% growth led by SPH growth of 17% YoY. Advertisement revenues grew 28% YoY, better than our expectation of 25% YoY. EBITDA (without impact of Ind-AS116) came in at Rs 158.7 crore, with margins of 18%, largely in line with our estimates. On a reported basis, EBITDA was at Rs 279 crore. Margins of 31.6% as rent are now charged under depreciation and interest under Ind-AS 116. PAT (without impact of Ind-As116) came in at Rs 44 crore, a tad better than our expectation of Rs 39.9 crore. However, given the straight lining of rental as depreciation and interest in initial year under Ind-As, reported PAT was at Rs 16.2 crore.

Outlook

PVR remains a key beneficiary of the thriving multiplex industry. However, valuations at 9.5x FY21 EV/EBITDA at on the higher end. We maintain our HOLD recommendation and value it at 10x FY21E EV/EBITDA. Hence, we arrive at a revised target price of Rs 1810. We continue to prefer Inox over PVR, given the former lower valuations with relatively better balance sheet and comparable growth trajectory.