Motilal Oswal Securities Reports on PVR

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 Revenue in-line: Overall revenue grew 9.4% YoY to INR4b. Movie exhibition

revenue grew 7.2% YoY to INR3.7b, movie distribution revenue grew 308% YoY to

INR188m, while other revenue (bowling and restaurant) declined 3% YoY to

INR182m. EBITDA margin declined 580bp YoY to 14.7% due to 150bp YoY decrease

in gross margin, and the impact of aggressive expansion and unfavorable

operating leverage. PAT declined 63.1% YoY to INR92m.

 Key performance indicators remain strong: ATP grew 6% YoY to INR180 largely

due to higher pricing power and addition of new properties at better locations.

SPH grew 20% YoY (6% price increase and 14% volume increase) to INR64 on

account of improvement in F&B offerings, change in ‘look and feel’ of the F&B

bars, and better pricing. Advertising revenue also showed robust growth of 14% to

INR405m on higher bargaining power vis-à-vis advertisers and unique offering of

‘pay per eye ball’ contract with large advertisers. The company has also re-
financed its debt, which will reduce interest cost by 50-70bp over next two years.

 Expect robust performance in 3QFY15: Our management interaction and channel

checks indicate that 3QFY15 has begun on a robust note, with strong content like

Bang Bang, Haider and Happy New Year driving footfall growth. Footfalls declined

5% to 15.7m in 2QFY15, but in October 2014, footfalls were 5.7m, significantly

higher than the 3.5m in October 2013. We expect higher growth in 3Q to make up

for the sedate revenue growth in 2Q.

 Maintain Buy: We believe growth has bottomed out and expect 20% revenue

CAGR over FY14-17, led by strong content pipeline and footfalls. Movie screening

is an under-penetrated business in India and we believe PVRL will be the biggest

beneficiary of revival in discretionary spends. The stock trades at 13.4x FY15E and

10.1x FY16E EBITDA. We value PVRL at 11x FY16E EBITDA. Buy with a target price

of INR750.