We recently met Mr. Gautam Dutta, CEO, PVR Cinemas. The company is confident of adding 60 screens per year over the next 5 years and recently touched key milestone of 500 screens. Unlike few peers which add smaller properties of 3–4 screens, PVR is aiming for higher number of screens (6–12) per property (40–50% of new additions will be in this format). It will not only increase screen occupancy, but also boost the number of shows available at different time slots.
The company is taking steps to increase SPH (as a % of ATP) by launching PVR branded products (chips and aamras). Wifi services offer and relaunch of popcorn business are commendable initiatives. Q4 is historically weak but better this time; the stock is attractive (corrected 20% from peak) with strong line up of movies in FY17.
PVR is planning to relaunch popcorn soon with increased shelf life of 6–12 months (3–4 months earlier) through better packaging. Investment in machines and factory will be Rs 3.5 crore.
We remain enthused by PVR’s dominance and expansion in the exhibition business. At CMP, the stock is trading at 22.3x and 18.0x FY17E and FY18E EPS, respectively. We maintain ‘buy/sector outperformer’ with a target price of R 947.