Published on 27/06/2020 1:30:11 PM | Source: Motilal Oswal Financial Services Ltd

Buy PVR Ltd For Target Rs.1,350 - Motilal Oswal

Follow us Now on Telegram ! Get daily 10 - 12 important updates on Business, Finance and Investment. Join our Telegram Channel 

Download Telegram App before Joining the Channel

Cinema closures led by COVID-19 drag earnings

* PVR’s 4QFY20 revenue/EBITDA plunged 23%/73% in 4QFY20 due to cinema closures led by the COVID-19 pandemic. Revenue was in line, while EBITDA was better than expected on lower-than-estimated operational expenses.

* Given the complete washout in 1QFY21 (on the nationwide lockdown) and talks of reduced capacity due to social distancing, we have cut our estimated FY21/FY22E revenue by 45%/13%. We expect EBITDA loss of INR677m in FY21E (v/ profit of INR5b earlier) and cut EBITDA est. by 20% for FY22E.


Revenue/EBITDA decline 23%/73% YoY

* 4QFY20 consolidated revenue declined 23% YoY (down 30% QoQ) to INR6.5b (inline), mainly due to closure of cinemas during the last few days in Mar’20 owing to the COVID-19 crisis.

* Subsequently, footfalls declined 29% YoY to 19.5m while occupancy stood at 30.6% in 4QFY20. Average ticket price rose to INR204 (4.6% YoY) along with an increase in spend per head to INR96 (5.7% YoY).

* On pre Ind-AS 116, EBITDA declined 73% YoY to INR428m (v/s est. INR108m). Margin contracted 1,260bp to 6.6% as revenue declined more than operating expenses.

* The company reported PBT loss of INR344m (v/s est. loss of INR945m) from INR749m profit in 4QFY19. Net loss came in at INR388m (v/s PAT of INR484m in 4QFY19 and INR708m in 3QFY20). After adjustment, net loss stood at INR369m.

* Net debt stood at INR7.8b. PVR had liquidity of INR3.2b as at Mar’20 and INR2.3b as at 7th Jun’20, which includes undrawn committed bank lines.

* On consolidated basis, total screen count increased to 845 in 4QFY20 from 763 in 4QFY19, a growth of 11%.


Highlights from management commentary

* Rental recognition: Unlike INOX, PVR recognized rentals in 4QFY20 as it has yet not received credit notes. In 1QFY21, PVR has not paid rent yet; a decision on accounting will be taken once more clarity emerges.

* Fixed cost reduction: PVR’s monthly opex run-rate stands at INR1.4b, of which rental and CAM charges account for INR600-650m; this fixed cost should reduce by 70-75% during the lockdown period.

* Capex: Priority is to complete screens that are 80-90% done. Currently, 20- 50 screens are in various stages of fit-out; committed capex ranges between INR500m-1b. However, management will re-evaluate it once operations resume.


Valuation and view

* The near-term earnings outlook remains subdued due to COVID-19 as a decision on cinemas reopening would be taken in the last phase. Further, reduced capacity due to social distancing norms may further hurt the revenue generating capability of cinemas.


To Read Complete Report & Disclaimer Click Here


For More Motilal Oswal Securities Ltd Disclaimer SEBI Registration number is INH000000412


Above views are of the author and not of the website kindly read disclaimer