Neutral PVR; target of Rs 1570: Motilal Oswal

Motilal Oswal's research report on PVR

The merger of PVR-Inox has led to the creation of the largest multiplex chain, equipped with over 1,600 screens and a seating capacity of 0.35m. The merged entity with a 18% screen share and 30% box office share looks to further strengthen its leadership position and targets to add 180-200 screens annually with focus on higher growth Southern market (40% of new screens to be opened in South). Nearly 82% of the screens are to be opened in Metro and Tier 1 cities. The company has 160 screens under fit-outs, while ~150-160 are expected to be received for handover in FY24. Further, leveraging its wide reach and scale, the company looks to expand its Food & beverage (F&B) segment by upgrading product offerings at competitive pricing and by tying up with Zomato and Swiggy for delivery. Although the company targets to achieve 5% of F&B spends from the delivery, any significant contribution from this segment remains far-fetched.

Outlook

The rich valuation the company commanded historically has contracted, given the slower recovery and risk posed by OTT players. We value the merged entity at 9x FY24E EV/EBITDA and maintain our TP of INR1,570. We reiterate our Neutral rating on the stock.