BUY PVR - Robust operating performance; Buy with a target price of Rs 983 - AnandRathi

PVR - Robust operating performance; Buy with a target price of Rs 983

We retain our Buy on PVR, with a revised price target of Rs. 983. We raise our FY16, FY17 and FY18 revenue estimates marginally. However, we trim our EBITDA estimates 1%--3.5% due to higher employee costs. Nevertheless, we expect the EPS to go up 5.5% in FY16 due to higher other income, lower depreciation and lower taxes than initially envisaged. EPS for FY17 and FY18 are marginally down due to lower EBITDA partly compensated for by an increase in other income and lower depreciation.

Revenue up 19% yoy. Net box office collections were up only 9% due to a 17% decline in net box office collections of the top-five movies (from Rs. 1.25bn in Q3 FY15 to Rs. 1.04bn). F&B revenues were up 15% yoy and advertising revenues jumped a whopping 29% yoy. PVR reported strong growth in the movie distribution business, and stable revenues in the bowling alley business.

Better operating parameters. ATP registered 8% growth yoy due to higher prices for blockbuster movies. F&B spending per head was up 11% yoy. Ad revenue grew a stellar 22% yoy. However, footfall growth was tepid at 3% yoy (-1% on comparable properties). PVR opened 17 screens during the quarter and plans to open 29 more by end-FY16. Occupancy was 34%, the same as in Q3 FY15.

EBITDA grew 3.7% yoy. The operating performance did not improve in line with revenue growth dragged down by (a) increase in entertainment taxes, of 213bps, which impacted margins by ~Rs. 68m (b) employee costs hit by the Rs. 50m bonus, and (c) increase in the share of the (low-margin) movie distribution business, from 2.8% to 8.5% of revenues.

Valuation. We value the stock at 10.5x FY18e EV/EBITDA to arrive at a price target of Rs. 983. Risks. Poor content and increase in taxes.

Shares of PVR LTD. was last trading in BSE at Rs.749.55 as compared to the previous close of Rs. 739.7. The total number of shares traded during the day was 4081 in over 316 trades.

The stock hit an intraday high of Rs. 759.85 and intraday low of 739.95. The net turnover during the day was Rs. 3068699.

Source : Equity Bulls

Keywords