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.
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