Buy PVR Ltd For Target Rs.1,870 - ICICI Direct
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Healthy recovery seen…
About the stock: PVR Ltd is the market leader in terms of multiplex screen count in India. Currently, it operates 860 screens in 179 cinemas in 73 cities in India and Sri Lanka with an aggregate seating capacity of ~1.82 lakhs seats.
* With leadership in the high realisation key markets of Maharashtra/NCR, it enjoys superior ATP, SPH and advertisement compared to peers.
Q3FY22 Results: The quarter saw a robust recovery led by healthy content flow.
* Reported revenue came in at | 614.2 crore, (up ~4x QoQ) with box office revenue of | 300.2 crore, ad revenues of | 40.9 crore and | 180.5 crore of F&B revenues. Footfalls were up 3.5x QoQ at 14.5 million and ATP at | 239 was up 18% QoQ owing to slate mix. SPH at | 129 was flattish QoQ
* EBITDA (ex- Ind AS116) was at | 38 crore (margin 6.2%) against EBITDA loss of | 115.1 crore in Q2. On reported basis, EBITDA was at | 164.9 crore
* The reported net loss was lower at | 10.2 crore due to other income of | 67.4 crore with respect to rental waivers received (net of rent paid). The company reported net loss (without impact of Ind AS116) at | 21.9 crore
What should investors do? PVR’s share price has grown by ~23% over the past five years (from ~| 1253 in January 2017 to ~| 1537 levels in October 2021).
* We maintain BUY rating on the company
Target Price and Valuation: We value PVR at | 1870 i.e. 13x FY24E EV/EBITDA
Key triggers for future price performance:
* We expect recovery in footfalls/revenues with release of big budget Hindi/Hollywood movies lined up post Omicron normalisation
* The company is likely to have ~8-10% permanent saving in costs (ex-rental) given the rationalisation measures
* Consolidation (10-15% single screens may be shut permanently), which will drive increased market share of multiplexes
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 | 495
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