Though PVR had guided for 67 new screens in FY18, delays in mall completion and regulatory approvals resulted in only 49 additions.
PVR’s Q4FY18 revenue, Ebitda and PAT stood higher than our estimate, largely driven by increase in advertising income and ATP. Key positives: 1) 31% y–o-y growth in LTL advertising income, the highest in past nine quarters; 2) 9% y-oy- LTL ATP growth; and 3) 11% y-o-y jump in LTL SPH. Key negative was the 2% y-o-y decline in LTL footfalls due to the dispute between digital service providers and producers in South India and non release of Padmaavat in some states. Though PVR had guided for 67 new screens in FY18, delays in mall completion and regulatory approvals resulted in only 49 additions.
Key monitorables: 1) Rise in rental cost (due to competition); 2) PIL against Maharashtra government for carrying outside food inside theatres; and 3) LBT in Chennai. Initiatives like loyalty programme and technological upgradation of screens are long-term positives. Maintain ‘buy’. While LTL net box office collection jumped 10% y-o-y aided by 9% LTL y-o-y ATP increase, LTL footfall fell 2% y-o-y. Ad growth stood at 37% y-o-y and PVR is confident of clocking 15-20% y-o-y ad growth in FY19. Overall, SPH rose 12% y-o-y. Going ahead, 1) PVR is targeting 90 plus screen additions in FY19; 2) Plans to obtain in-principle approval from members for raising debt up to Rs 10bn ensuring flexibility in case a takeover opportunity arises in future; 3) During the quarter all films were released post the agreement of an eight-week window with producers; and 4) PVR will incur capex of Rs 4-4.5bn in FY19.
We expect it to be key beneficiary of anticipated uptick in urban consumption. Screen expansion and movie line-ups are key monitorables. Rolling over to FY20E, we maintain ’Buy/SO’ with TP of Rs 1,695. At CMP, the stock trades at 33.4x FY19E and 26.1x FY20E EPS. We remain enthused by PVR’s pricing power with regards ATP, F&B and advertising. Obtaining in principal approval from members for raising debt upto Rs 10bn will ensure flexibility for PVR in case an opportunity for takeover arises in the future.