3 January 2017
Update
| Sector:
Media
PVR
BSE SENSEX
26,643
S&P CNX
8,192
Buy
Demonetization impact lower than initial expectations
The movie ‘Dangal’ was a savior; Maintaining Buy
CMP: INR1,167
TP: INR1,429(+22%)
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
PVRL IN
46.8
1,334 / 646
5/17/45
49.4
0.7
145
74.8
Financials Snapshot (INR b)
Y/E Mar
2016 2017E 2018E
Net Sales
18.7
21.2
26.0
EBITDA
3.3
3.5
4.8
PAT
1.2
1.0
1.7
EPS (INR)
25.5
20.4
35.8
Gr. (%)
664.3 -20.2
75.9
BV/Sh (INR)
186.2 204.0 234.4
RoE (%)
18.7
10.4
16.4
RoCE (%)
14.5
8.8
12.4
P/E (x)
45.7
57.3
32.6
P/BV (x)
6.3
5.7
5.0
Shareholding pattern (%)
As On
Sep-16 Jun-16 Sep-15
Promoter
25.3
25.3
26.3
DII
28.8
29.6
14.0
FII
32.6
30.6
25.4
Others
13.4
14.5
34.3
FII Includes depository receipts
Stock Performance (1-year)
PVR
Sensex - Rebased
1,350
1,100
850
600
‘Dangal’ crosses INR2.4b NBO collection, PVR has 20% market share:
The
Hindi film Dangal reported stellar net box office collection (NBO) of ~INR2.4b
until 31-December 2016 in India, which is expected to aid PVR (~20% market
share, according to management) in the current quarter. Stellar numbers by
Dangal show that demonetization cannot have much impact on the multiplex
business if content is good. No competition from other Hindi cinemas over last
weekend and the holiday season contributed to Dangal’s continued successful
run at the box office. The movie pipeline also appears strong with Shahrukh
Khan’s ‘Raees’ scheduled to be released on 26-January 2017 along with Hrithik
Roshan’s ‘Kaabil’.
Impact of demonetization lower than initially expected:
In 3QFY17, we
broadly expect average ticket prices (ATP) to remain flattish given poor content
overall (except for Dangal), SPH improvement of ~5%, and advertisement
income increase of 10-11%. Footfalls are expected to decline by 5-6% and SSG
by ~3%, which is lower than initial expectations. Considering addition of 32
screens from DT Cinemas (was not part of the base quarter, i.e. 3QFY16), we
expect 10% YoY revenue growth in 3QFY17. It is important to note that the
base quarter was very strong with footfall growth of 19.7% to 18.8m and
occupancy at 37%, led by strong content like Bajrangi Bhaijaan, Baahubali,
Welcome Back, Drishyam and MI Rogue Nation (contributing 51% of net box
office collection).
DT integration completed, to be rebranded to PVR:
According to
management, the integration of DT Cinemas with PVR is now complete, which
adds to 32 screens to PVR and is expected to take total screens beyond 600 in
FY17. DT Cinemas being located at premium location enjoys higher ATP and
F&B SPH v/s PVR. We note that all DT Cinemas screens will be rebranded to
PVR. In our view, F&B margin can expand significantly with PVR’s scale and
expertise coming into play.
Valuation and view:
We expect the impact of demonetization to be lower than
our previous estimates. We thus increase our earnings estimates by 22% for
FY17 (was mainly cut because of impact on operating leverage in view of
demonetization) while broadly maintaining FY18 estimates. We introduce FY19
estimates, and expect 21% revenue CAGR and 29% PAT CAGR over FY16-19E,
driven by EBITDA margin. We expect overall EBITDA margin to improve from
17.7% in FY16 to 19% in FY19, mainly driven by synergies from DT Cinemas
integration. We roll over our valuation to December-18 with target multiple of
12x EV/EBITDA (earlier 14x FY18E), and maintain
Buy
with a target price of
INR1,429, implying upside of 22%.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 6129 1535
Chintan Modi
(Chintan.Modi@MotilalOswal.com); +91 22 6129 1554