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We have revised our estimates downwards to factor in: 1) cricket heavy
4QFY2011, 2) volatility in the box office performance of movies, and 3) higher
movie related expenses (movie production, distribution and amortisation costs).
We maintain a Buy on the stock.
Revenues, earnings impacted by underperformance of movies and high costs:
PVR’s core exhibition business registered a growth of 5% yoy/decline of 2.5% qoq,
impacted by promising movie pipeline, which however failed to attract patrons.
Barring high advertisement and royalty income (up 35% yoy/34% qoq), all other
income declined sequentially, however registered a flattish growth yoy. In terms of
earnings, PVR registered a loss of `5cr (profit of `7cr in 3QFY2010 and `9cr in
2QFY2011) on account of high production costs incurred for Khelein Hum Jee
Jaan Sey, while the movie had almost negligible revenue traction. The
depreciation and amortisation costs increased 50.5% qoq. We estimate ~55-60%
cost of Khelein Hum Jee Jaan Sey (budget at ~35-40cr) amortised this quarter.
Outlook and Valuation: For FY2010-12, we expect PVR to register 39% CAGR in
top-line aided by seat additions (we have factored in only 4-5% improvement in
ATP and F&B spend) and higher contribution from PVR Pictures (~129% CAGR
over the period). Earnings is expected to register a CAGR of 364% over the period
albeit on a low base (FY2010 earnings were affected by weak movie pipeline and
1QFY2010 washout was on account of the strike) and we expect the operating
margins of 18-19% in FY2011-12 on a low base. At the CMP of `133, the stock
is trading at attractive valuations of 12.4x FY2012E EPS. We maintain a Buy on
the stock, with a revised Target Price of `160 (`231), based on 15x FY2012E EPS
of `10.7.
Investment Rationale
Diversified model ensures de-risked business: PVR is present across the movie
value chain (exhibition-production-distribution) and has forayed into retail
entertainment through PVR Blu-O. While we expect PVR Pictures to post ~128%
CAGR over FY2010-12 aided by an improved movie slate, PVR Blu-O is
expected to register ~162% CAGR over FY2010-12 on incremental earnings
from newly opened properties (likely to open a new property in 4QFY2011).
Exhibition capacity ramping up: PVR opened 19 screens in 1HFY2011 and has
ambitious plans of opening further 16 screens by 4QFY2011 (we have
conservatively factored in opening of 4 screens in 4QFY2011). However,
opening of more than 4 screens in 4QFY2011, poses an upside risk to our
estimates. For FY2011E, we have factored in 23 new screens and 5,605 seat
additions resulting from 4 new properties. The company expects to fund
exhibition capex largely via internal accruals and funds realised from unlocking
of the Phoenix Mills property (management is looking at sale and lease back of
the property by end of FY2011, and expects to rake in cash of ~`80-100cr)
Outlook and Valuation
We have revised our estimates downwards to factor in:1) cricket heavy 4QFY2011,
2) volatility in the box office performance of a movie, and 3) higher movie related
expenses (movie production, distribution and amortisation costs)
PVR added 7 screens and 8,991 seats under operation in 3QFY2011. Going
forward, we expect PVR to end FY2011 with 23 new screens adding 5,605 seats. We
have modeled 22mn footfalls for FY2011 and expect 5% yoy rise in ATP to `160. For
FY2010-12, we expect PVR to register 39% CAGR in top-line aided by seat additions
(as we have factored in only 4-5% improvements in ATP and F&B spend) and higher
contribution from PVR Pictures (~129% CAGR over the period). Earnings are
expected to register a CAGR of 364% over the period albeit on low base (FY2010
earnings were affected by weak movie pipeline and 1QFY2010 washout was on
account of the strike) and we expect expansion in operating margins to 18-19%
during FY2011-12. At the CMP of `133, the stock is trading at attractive valuations
of 12.4x FY2012E EPS. We maintain a Buy on the stock, with a revised Target Price
of `160 (`231), based on 15x FY2012E EPS of `10.7.
Downside risks to our estimates include delayed rollout of proposed multiplexes,
higher rental expense and a weak movie pipeline.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
PVR – 3QFY2011 Result Update
Angel Broking maintains a Buy on PVR with a Target Price of Rs. 160.
We have revised our estimates downwards to factor in: 1) cricket heavy
4QFY2011, 2) volatility in the box office performance of movies, and 3) higher
movie related expenses (movie production, distribution and amortisation costs).
We maintain a Buy on the stock.
Revenues, earnings impacted by underperformance of movies and high costs:
PVR’s core exhibition business registered a growth of 5% yoy/decline of 2.5% qoq,
impacted by promising movie pipeline, which however failed to attract patrons.
Barring high advertisement and royalty income (up 35% yoy/34% qoq), all other
income declined sequentially, however registered a flattish growth yoy. In terms of
earnings, PVR registered a loss of `5cr (profit of `7cr in 3QFY2010 and `9cr in
2QFY2011) on account of high production costs incurred for Khelein Hum Jee
Jaan Sey, while the movie had almost negligible revenue traction. The
depreciation and amortisation costs increased 50.5% qoq. We estimate ~55-60%
cost of Khelein Hum Jee Jaan Sey (budget at ~35-40cr) amortised this quarter.
Outlook and Valuation: For FY2010-12, we expect PVR to register 39% CAGR in
top-line aided by seat additions (we have factored in only 4-5% improvement in
ATP and F&B spend) and higher contribution from PVR Pictures (~129% CAGR
over the period). Earnings is expected to register a CAGR of 364% over the period
albeit on a low base (FY2010 earnings were affected by weak movie pipeline and
1QFY2010 washout was on account of the strike) and we expect the operating
margins of 18-19% in FY2011-12 on a low base. At the CMP of `133, the stock
is trading at attractive valuations of 12.4x FY2012E EPS. We maintain a Buy on
the stock, with a revised Target Price of `160 (`231), based on 15x FY2012E EPS
of `10.7.
Investment Rationale
Diversified model ensures de-risked business: PVR is present across the movie
value chain (exhibition-production-distribution) and has forayed into retail
entertainment through PVR Blu-O. While we expect PVR Pictures to post ~128%
CAGR over FY2010-12 aided by an improved movie slate, PVR Blu-O is
expected to register ~162% CAGR over FY2010-12 on incremental earnings
from newly opened properties (likely to open a new property in 4QFY2011).
Exhibition capacity ramping up: PVR opened 19 screens in 1HFY2011 and has
ambitious plans of opening further 16 screens by 4QFY2011 (we have
conservatively factored in opening of 4 screens in 4QFY2011). However,
opening of more than 4 screens in 4QFY2011, poses an upside risk to our
estimates. For FY2011E, we have factored in 23 new screens and 5,605 seat
additions resulting from 4 new properties. The company expects to fund
exhibition capex largely via internal accruals and funds realised from unlocking
of the Phoenix Mills property (management is looking at sale and lease back of
the property by end of FY2011, and expects to rake in cash of ~`80-100cr)
Outlook and Valuation
We have revised our estimates downwards to factor in:1) cricket heavy 4QFY2011,
2) volatility in the box office performance of a movie, and 3) higher movie related
expenses (movie production, distribution and amortisation costs)
PVR added 7 screens and 8,991 seats under operation in 3QFY2011. Going
forward, we expect PVR to end FY2011 with 23 new screens adding 5,605 seats. We
have modeled 22mn footfalls for FY2011 and expect 5% yoy rise in ATP to `160. For
FY2010-12, we expect PVR to register 39% CAGR in top-line aided by seat additions
(as we have factored in only 4-5% improvements in ATP and F&B spend) and higher
contribution from PVR Pictures (~129% CAGR over the period). Earnings are
expected to register a CAGR of 364% over the period albeit on low base (FY2010
earnings were affected by weak movie pipeline and 1QFY2010 washout was on
account of the strike) and we expect expansion in operating margins to 18-19%
during FY2011-12. At the CMP of `133, the stock is trading at attractive valuations
of 12.4x FY2012E EPS. We maintain a Buy on the stock, with a revised Target Price
of `160 (`231), based on 15x FY2012E EPS of `10.7.
Downside risks to our estimates include delayed rollout of proposed multiplexes,
higher rental expense and a weak movie pipeline.
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