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Exhibition business’ PAT at INR 80 mn, ahead of estimate
PVR’s Q3FY11 exhibition business revenue and PAT stood at INR 1,032 mn and
INR 80 mn (against our estimate of INR 1,000 mn and INR 67 mn), respectively.
Y-o-Y, exhibition business revenues rose 5% and PAT dipped 6%. Film
distributor’s share, as a percentage of revenues, decreased 30bps Y-o-Y due to
higher payouts in Q3FY10 for ‘3 Idiots’ and ‘Ajab Prem Ki Ghajab Kahani’.
Employee costs, rent and other expenditure, as a percentage of revenues, rose
Y-o-Y on account of drop in occupancy and revenues across comparable
properties. Q3FY11 EBITDA and PAT margins for the exhibition business stood at
20.5% and 7.8%, respectively.
Occupancy at 28%; ATP up 5% Y-o-Y
The company enjoyed 28% occupancy in Q3FY11 against 37% in Q3FY10 and
30% in Q2FY11. Occupancies in Q3FY11 were adversely impacted on account of
poor performance of movies such as ‘Action Replay’, ‘Khelein Hum Jee Jaan Sey’,
‘Guzaarish’, ‘No Problem’, ‘Tees Mar Khan’ against Q3FY10 that saw the release
of ‘3 Idiots’ and ‘Ajab Prem Ki Ghajab Kahani’. Footfalls increased 2%, to 5.2
mn, from 5.1 mn in Q3FY10. ATP for the quarter grew at 5% over Q3FY10 (from
INR 159 to INR 167). F&B spending per head and advertising & royalty income
increased 3% and 35%, Y-o-Y, respectively.
Disappointing quarter for movie production; to defocus
Company’s movie production and distribution segment reported EBIT level loss
of INR 178 mn against profit of INR 9 mn in Q2FY11 and a loss of INR 41 mn in
Q3FY10. Q3FY11 was impacted as a result of the poor performance of ‘Khelein
Hum Jee Jaan Sey’. Management has stated its intent to moderate investments
in movie production and focus on the exhibition business.
Outlook and valuations: Positive; maintain ‘BUY’
PVR is planning to expand its exhibition business further and intends to add 24
more screens in the next four months. Further, new businesses such as movie
production and distribution and alternative entertainment are expected to
contribute positively to the company’s overall performance, going forward. The
stock is currently trading at P/E of 18.6x FY12E and looks attractive. We
maintain our ‘BUY’ recommendation on the stock and rate it ‘Sector
Performer’ on relative return basis.
Company Description
PVR was incorporated in 1995 pursuant to a JV with Village Roadshows, one of the
largest cinema exhibition companies in the world. It opened its first multiplex in Delhi in
1997. In November 2002, Village Roadshows divested its stake in PVR as part of an
overall strategy to rationalise its operations across 18 countries. Since then, PVR has
come a long way and is presently one of the leading multiplex players in India with 142
screens across 33 properties. PVR is also present in the movie distribution and
production business through its 60% subsidiary PVR Pictures (post stake-sale). It is also
venturing into retail entertainment and management of food courts to diversify its
revenue stream.
Investment Theme
PVR has an aggressive expansion plan to increase the number of screens in operation
and we expect it to have ~158 screens by FY11 end. Even though PVR will have
multiplexes across the country, it will have a significant presence in Delhi, Maharashtra,
Uttar Pradesh, Punjab, Haryana, Karnataka, and Andhra Pradesh. This strategy will help
it in bargaining better terms for movie rights with distributors. It will also put PVR
Pictures in a better position to vie for movie rights for these territories. Since most of
PVR’s operational properties were based in Delhi, Haryana, and Karnataka, they did not
enjoy entertainment tax exemptions. This had an adverse impact on the Company’s
margins. However, a majority of the new multiplexes are coming up in states that have
announced entertainment tax exemptions. Therefore, the effective entertainment tax for
PVR is expected to come down.
Key Risks
Delay in rollout of proposed multiplexes, higher share of net box office collections to the
distributor for movie rights, over-capacity in certain pockets leading to lower
occupancies, unavailability of quality content, and competition from other forms of
entertainment are some of the key risks to our recommendation. Start-up losses, if any,
from new business ventures could also impact the company’s profitability.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Exhibition business’ PAT at INR 80 mn, ahead of estimate
PVR’s Q3FY11 exhibition business revenue and PAT stood at INR 1,032 mn and
INR 80 mn (against our estimate of INR 1,000 mn and INR 67 mn), respectively.
Y-o-Y, exhibition business revenues rose 5% and PAT dipped 6%. Film
distributor’s share, as a percentage of revenues, decreased 30bps Y-o-Y due to
higher payouts in Q3FY10 for ‘3 Idiots’ and ‘Ajab Prem Ki Ghajab Kahani’.
Employee costs, rent and other expenditure, as a percentage of revenues, rose
Y-o-Y on account of drop in occupancy and revenues across comparable
properties. Q3FY11 EBITDA and PAT margins for the exhibition business stood at
20.5% and 7.8%, respectively.
Occupancy at 28%; ATP up 5% Y-o-Y
The company enjoyed 28% occupancy in Q3FY11 against 37% in Q3FY10 and
30% in Q2FY11. Occupancies in Q3FY11 were adversely impacted on account of
poor performance of movies such as ‘Action Replay’, ‘Khelein Hum Jee Jaan Sey’,
‘Guzaarish’, ‘No Problem’, ‘Tees Mar Khan’ against Q3FY10 that saw the release
of ‘3 Idiots’ and ‘Ajab Prem Ki Ghajab Kahani’. Footfalls increased 2%, to 5.2
mn, from 5.1 mn in Q3FY10. ATP for the quarter grew at 5% over Q3FY10 (from
INR 159 to INR 167). F&B spending per head and advertising & royalty income
increased 3% and 35%, Y-o-Y, respectively.
Disappointing quarter for movie production; to defocus
Company’s movie production and distribution segment reported EBIT level loss
of INR 178 mn against profit of INR 9 mn in Q2FY11 and a loss of INR 41 mn in
Q3FY10. Q3FY11 was impacted as a result of the poor performance of ‘Khelein
Hum Jee Jaan Sey’. Management has stated its intent to moderate investments
in movie production and focus on the exhibition business.
Outlook and valuations: Positive; maintain ‘BUY’
PVR is planning to expand its exhibition business further and intends to add 24
more screens in the next four months. Further, new businesses such as movie
production and distribution and alternative entertainment are expected to
contribute positively to the company’s overall performance, going forward. The
stock is currently trading at P/E of 18.6x FY12E and looks attractive. We
maintain our ‘BUY’ recommendation on the stock and rate it ‘Sector
Performer’ on relative return basis.
Company Description
PVR was incorporated in 1995 pursuant to a JV with Village Roadshows, one of the
largest cinema exhibition companies in the world. It opened its first multiplex in Delhi in
1997. In November 2002, Village Roadshows divested its stake in PVR as part of an
overall strategy to rationalise its operations across 18 countries. Since then, PVR has
come a long way and is presently one of the leading multiplex players in India with 142
screens across 33 properties. PVR is also present in the movie distribution and
production business through its 60% subsidiary PVR Pictures (post stake-sale). It is also
venturing into retail entertainment and management of food courts to diversify its
revenue stream.
Investment Theme
PVR has an aggressive expansion plan to increase the number of screens in operation
and we expect it to have ~158 screens by FY11 end. Even though PVR will have
multiplexes across the country, it will have a significant presence in Delhi, Maharashtra,
Uttar Pradesh, Punjab, Haryana, Karnataka, and Andhra Pradesh. This strategy will help
it in bargaining better terms for movie rights with distributors. It will also put PVR
Pictures in a better position to vie for movie rights for these territories. Since most of
PVR’s operational properties were based in Delhi, Haryana, and Karnataka, they did not
enjoy entertainment tax exemptions. This had an adverse impact on the Company’s
margins. However, a majority of the new multiplexes are coming up in states that have
announced entertainment tax exemptions. Therefore, the effective entertainment tax for
PVR is expected to come down.
Key Risks
Delay in rollout of proposed multiplexes, higher share of net box office collections to the
distributor for movie rights, over-capacity in certain pockets leading to lower
occupancies, unavailability of quality content, and competition from other forms of
entertainment are some of the key risks to our recommendation. Start-up losses, if any,
from new business ventures could also impact the company’s profitability.
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