PVR’s Q1FY16 revenue and PAT surpassed our estimates propelled by exceptionally good content. Key positives were: (i) 35% y-o-y surge in net box office revenue; (ii) 16% y-o-y jump in F&B spending per head; (iii) 27% y-o-y spurt in ad revenue; and (iv) 803 bps y-o-y ebitda margin rise riding double digit same store admits growth. Differential pricing during weekends & weekdays and stellar F&B growth driven by price and volume on account of excellent content led to a flourishing quarter.
We anticipate the current 800bps difference between net box office and ad revenue growth to converge gradually with the usage of analytics and more sectors using multiplexes for ads.
PVR guided for ad growth of 18-20% y-o-y in FY16. In Q1FY16, Hollywood contributed 30%, regional movies 16% and Bollywood movies contributed the balance to box office collection. The company is planning to refinance its debt, which will lead to 80-100 bps saving in interest cost. 65-70 screens will be added in FY16. July is likely to be one of the best months in PVR’s history.
We remain enthused by PVR’s dominance and expansion in the exhibition business. Hence, we anticipate the company to be key beneficiary of the good content pipeline. At current market price, the stock is trading at 31.7x and 22.0x FY16e and FY17E EPS, respectively. We maintain ‘buy/sector performer’ with target price of Rs 977.