The management expects RoCE profile across these screens (over 3-5 years) to be largely in sync with PVR as lower ATP/SPH will get negated with lower per screen capex.
Consumption slowdown is visible across discretionary spends, however our interaction with industry players suggests multiplex’ footfall growth has been healthy on strong movie content (aided by low base). This, coupled with steady growth in ATP^ and F&B spend (SPH, adj. for GST), augurs well for growth. However, ad revenue has seen some slowdown, as visible across other ad categories (TV and print) as well.
PVRL’s ability to better monetise footfalls has always been above par, given superior operating matrix (ATP, SPH, ad/screen, occupancy rates) and healthy geographic reach (30% North, 34% West/ South each). However, premium valuations had kept us on the sidelines. However, given recent stock correction (down 15% in last 2 months), we upgrade the stock to ‘add’ (target price of Rs 1,740, 11x EV/EBITDA Sep’FY21E; REDUCE earlier), as we tweak our estimates to factor in possible ad slowdown.
Key highlights, GBOC industry collections are already up 30% YoY in Q2FY20 on healthy movie content (aided by low base YoY) – broad-based success with 5 movies grossing >Rs 100 crore in Q2 (vs two movies Y-o-Y) across Bollywood (Chhichhore, Mission Mangal, Super 30), regional (Saaho) and Hollywood (The Lion King, Spider-Man) Expansion plans intact as PVR expects to add 80+ screens in FY20-21 each – management does not expect any significant slowdown in mall development over medium term, which will help it scale up presence across regions.
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PVR Utsav will operate 10-12 screens in FY20 (~25 screens in FY21E) as it targets to expand reach in tier III and beyond cities. The management expects RoCE profile across these screens (over 3-5 years) to be largely in sync with PVR as lower ATP/SPH will get negated with lower per screen capex.
Capex guidance at Rs ~500 crore in FY20 maintained for screen additions (2/3rd of capex; Rs 30 mn/screen) and upgrade/ renewal of older screens (1/3rd capex). Debt expected to peak at current levels (Rs 1,300-1,400 crore) as internal accruals will fund expansion plans; no timelines shared on the enabling resolution to raise up to Rs 500 crore.