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Buy PVR Ltd For Target Rs.1,610

Post reopening response key ahead…

About the stock: PVR Ltd is the market leader in terms of multiplex screen count in India. Currently, the company operates 842 screens in 176 cinemas in 71 cities in India and Sri Lanka with an aggregate seating capacity of ~1.8 lakhs seats.

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

Q1FY22 Results: PVR reported weak Q1FY22 results as expected.

* Reported revenue came in at | 59.3 crore, (67.3% QoQ de-growth)

* EBITDA loss (without impact of Ind-AS116) was at | 121.5 crore against EBITDA loss of | 127.7 crore in Q4 as it has provided for lower rental expenses (| 30.9 crore vs. | 70.9 crore in Q4) given they are under negotiation with landlords for waivers.

What should investors do?

PVR’s share price has grown by ~17% over the past five years (from ~| 1196 in July 2016 to ~| 1400 levels in July 2021).

* We maintain BUY rating on the company

Target Price and Valuation: We value PVR at | 1610 i.e. 12.5x FY23E EV/EBITDA.

Key triggers for future price performance:

* Reopening of theatres post the lockdown, which should drive releases and subsequent in recovery in footfalls/revenues

* Release of big budget Hindi movies from festive season onwards

* Consolidation (10-15% single screens may be shut permanently), which will drive increased market share of multiplexes.

Alternate Stock Idea: Apart from PVR, in our telecom & media coverage we like Bharti Airtel

* A play on favourable industry structure - a good enough kicker for eventual hike in tariff as well as superior digital play in the medium to long term

* BUY with target price of | 690

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