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Weak box office performance!

About the stock: PVR Ltd is the market leader in terms of multiplex screen count in India. Currently, it operates 864 screens in 175 cinemas in 75 cities in India and Sri Lanka with an aggregate seating capacity of ~1.80 lakhs seats as on Q3FY23.

* With leadership in the high realisation/key markets of Maharashtra and NCR, it enjoys superior ATP, SPH and advertisement than peers

Q2FY23 Results: PVR reported a weak performance.

* PVR reported box office revenue of | 326.8 crore (down 38% QoQ) with footfalls down ~28% QoQ at 18 million and ATP at | 224 down~10% QoQ owing to weak content performance and promotional discounts during the quarter. Ad revenues was at | 57.2 crore, down 9% QoQ and at ~61% of pre-Covid levels. The company reported | 230.3 crore of F&B revenues, down 29% QoQ, with SPH at | 134, down 4% QoQ, given the weak offtake of F&B due to low footfall

* EBITDA loss (ex- Ind-AS 116) was at | 9 crore, given the tepid box office performance. On a reported basis, EBITDA was at | 153.7 crore (22.4% margin)

* The reported loss was | 71.2 crore. The company reported a net loss (without impact of Ind-AS 116) at | 56.6 crore

What should investors do: PVR share price has grown by ~21% over the past five years (from ~| 1396 in October 2017 to ~| 1689 levels in October 2022).

* We maintain BUY rating on the company

Target Price and Valuation: We value PVR at | 2130 i.e. 15x FY24E EV/EBITDA.

Key triggers for future price performance:

* Strong content slate line up to drive recovery in footfalls/revenues

* Merged entity (PVR Inox) will benefit from scale of expansion, faster growth trajectory and other revenues/cost synergy

Alternate Stock Idea: Apart from PVR, among multiplex we like Inox Leisure

* A play on footfall recovery post pandemic and strong balance sheet

* BUY with target price of | 720

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