Motilal Oswal maintains buy rating on PVR stock following DT Cinemas deal

PVR acquired DT Cinemas from DLF for Rs 500 crore.

pvr dt cinema
Multiplex major PVR Ltd today said it is looking to raise up to Rs 250 crore through issuance of non-convertible debentures (NCDs). (Reuters)

PVR acquired DT Cinemas from DLF for Rs 500 crore. DT Cinemas currently has 29 operational screens (10 upcoming)—primarily in Delhi, Gurgaon and Chandigarh;  its presence in DLF malls gives it a huge locational advantage, resulting in heavy footfalls. The acquisition gives PVR the right of first refusal in malls that DLF will  develop in future. PVR has announced that it will raise (subject to shareholder approval) Rs 350 crore (Rs 700 per share) in fresh equity from Multiples Private Equity to fund the deal. This preferential allotment will dilute PVR’s equity by 10.7%.

We believe the acquisition fits completely with PVR’s business model, with full set of synergies in F&B and advertising likely to  materialise over next the 12-18 months. With DT acquisition adding 39 screens and PVR targetting to open 60 new screens annually over the next two years, we expect total screen count at 608 by FY17 strengthening PVRs numero uno position in multiplex business in India.. We expect 24% revenue CAGR and 37% Ebitda CAGR over FY15-17 on the back of better outlook for content in FY16 and expected revival in discretionary spends. We upgrade FY17 Ebitda by 13%, build higher debt and dilution. We value PVR at  11x FY17E EV/Ebitda.

Maintain buy with a revised target price of Rs 775.

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