Buy PVR Inox Ltd for the Target Rs. 1,274 By Prabhudas Lilladher Ltd
Quick Pointers:
* Net debt declines to Rs3,652mn. Divestment of 4700 BC for Rs2,268mn will further strengthen the BS.
* Plans to open 150 screens (gross) in FY27E.
PVRINOX IN reported better than expected performance with pre-IND AS EBITDA margin of 16.8% (PLe 15.8%) as footfalls increased 8.6% YoY to 40.5mn (PLe 40mn) led by “Kantara-2” and sleeper hit “Dhurandhar”. After reporting strong performance for 2 consecutive quarters (occupancy of ~28% odd with pre-IND AS EBITDA margin of ~17%), BS strength has improved considerably with net debt declining to Rs3,652mn. Further, a pivot towards capital light model (149 screens signed under FOCO/asset-light model) will enable cash preservation ensuring BS strength remains intact. We expect modest footfall CAGR of 7.1% over FY25-FY28E with pre-IND AS EBITDA margin of 11.8%/14.3%/15.6% in FY26E/FY27E/FY28E led by tight cost control and disciplined screen churn. PVRINOX IN trades at an attractive valuation of 9x/7x our FY27E/FY28E pre-IND AS EBITDA estimates. Retain BUY with a TP of Rs1,274 (9.5x FY28E pre-IND AS EBITDA; multiple re-aligned as we roll forward our valuation to FY28E).
Top-line increased 9.5% YoY: Top line increased 9.5% YoY to Rs18,798mn (PLe Rs18,618mn) led by strong content. Footfalls increased by 8.6% YoY to 40.5mn (Ple40mn) while occupancy stood at 28.5%. In 3QFY26, Gross ATP increased 4.3% YoY to Rs293 (PLe of Rs290) while gross F&B SPH increased 4.3% YoY to Rs146 (PLe of Rs145).
Pre-Ind AS EBITDA margin at 16.8%: Ind-AS adjusted EBITDA increased 33.3% YoY to Rs3,153mn (PLe Ind-AS adjusted EBITDA of Rs2,946mn) with a margin of 16.8% as compared to a margin of 13.8% in 3QFY25. Ind-AS adjusted PAT stood at Rs1,149mn. After adjusting for an exceptional item of Rs446mn pertaining to retirement benefits arising from new labor code norms, Ind-AS adjusted PAT increased 134.2% YoY to Rs1,595mn (PLe Rs1,215mn) with a margin of 8.5%.
Con-call highlights: 1) PVRINOX IN typically showcases ~14–15 minutes of advertising per show on an average. 2) In cinema revenue of 4700BC gourmet popcorn was ~Rs130mn and the brand was sold in only ~50 premium properties. Hence, the divestment to Marico is expected to have negligible impact on margins or revenues. 3) Ad revenue declined 20.6% YoY to Rs1,180mn in 3QFY26 due to fewer marketable films (4 in 3QFY26 vs 8 in 3QFY25). 4) Electricity cost was down 3.8% YoY to Rs919mn on account of solar panel deployment across some properties. 5) Deferred tax assets are expected to be fully utilized over the next ~3.5–4 years. 6) Capex is pegged at Rs3.5–4.0bn for FY27E. 7) The Karnataka government’s proposal to cap movie ticket prices at Rs200 has been stayed by the High Court and the matter is currently sub-judice 8) The film distribution business operates with an EBITDA margin in the range of ~8–9%. 9) There are no plans to impair goodwill at this stage. 10) Unique visitations in CY25 were higher than CY24. 11) “Tuesday promotion” has been a key lever in attracting new users and driving repeat visitation to the cinemas. 12) Employee cost rose 10.5% YoY to Rs1,922mn in 3QFY26 due to a one-time, non-recurring incentive payout. 13) PVRINOX IN has no plans to enter movie production business. 14) 50%+ tickets are sold through online channels (aggregators and company app). 15) 85%+ of 4700 BC’s sales were outside of cinemas. 16) 3 food courts have been opened in collaboration with Devyani, and additional outlets are planned in near term.
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SEBI Registration number is INH000000933
