Analyst corner: Maintain ‘buy’on PVR, revised TP at Rs 1,538

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Published: October 27, 2018 3:09:30 AM

PVR’s Q2FY19 revenue, EBITDA and PAT exceeded our estimates, primarily due to higher F&B revenue.

PVR Q2FY19 revenue, EBITDA, PAT, F&B revenue, GST rate, PVR pricing power Net box office collection grew 17.4% Y-o-Y, aided by a 3.4% Y-o-Y increase in ATP and a 14.4% YoY spike in footfall, reflecting the recovery in discretionary spend.

PVR’s Q2FY19 revenue, EBITDA and PAT exceeded our estimates, primarily due to higher F&B revenue. Key highlights: i) consolidated revenue spurted 27.6% Y-o-Y aided by integration of SPI cinemas mid-quarter, 17.4% Y-o-Y jump in standalone NBOC, 25% Y-o-Y spike in F&B (although on a soft base) and advertising income growth of 13.2% YoY; ii) overall footfall grew 14.4% Y-o-Y aided by like-to-like (LTL) footfall growth of 9.2% Y-o-Y; and iii) as expected, SPH dipped 3.3% Y-o-Y, and we are watching it out closely.

On the F&B front, we see minimal risk to revenue as legal bodies have ruled in favour of multiplexes (refer to our note: Q2FY19: Strong content sets cash registers ringing). The recent acquisition of SPI cinemas has lifted PVR to the top in south India. This coupled with initiatives such as the loyalty programme and technological upgradation of screens are long-term positives. Maintain ‘BUY’.

Net box office collection grew 17.4% Y-o-Y, aided by a 3.4% Y-o-Y increase in ATP and a 14.4% YoY spike in footfall, reflecting the recovery in discretionary spend. The top five movies contributed 44% to GBOC (29% in base quarter), highlighting strong content across genres. Hollywood contributed 20% to revenue vis-a-vis 22% last year. While SPH declined 3.3% Y-o-Y as anticipated owing to price cuts across F&B offerings, F&B revenue shot up 25% Y-o-Y, fuelled by an uptick in volumes and a cut in GST rate from 18% to 5%. Ad growth remained robust at 13.2% YoY. Screen expansion is a key variable, and we are watching it closely.

In F&B, significant price cuts were taken considering different time slots but most of the prices have been brought back to earlier levels.
We expect revenue to be supported by aggressive screen expansion (including the MENA region) and a strong movie lineup. We also remain enthused by PVR’s pricing power and expect it to be a key beneficiary of the anticipated uptick in urban consumption. We retain target multiple of 30x FY20E EPS and arrive at a TP of `1,538. At CMP, the stock is trading at 25x FY20E EPS. We maintain ‘BUY/SO’.

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