PVR - Blockbuster Boost; Result Update Q3FY15 ::Edelweiss

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While PVR’s Q3FY15 revenue matched our expectation, PAT surpassed it riding effective cost rationalisation, which led to 513bps YoY EBITDA margin expansion. Key positives were: (i) 7% YoY rise in like-to-like (LTL) average ticket price (ATP) to INR187; (ii) 35% YoY surge in F&B revenue (17% YoY in H1FY15); and (iii) 28% YoY jump in ad revenue (~15% YoY in H1FY15) aided by blockbusters like PK. In spite of massive improvement vis-à-vis H1FY15 (14% YoY dip), LTL footfall growth was relatively subdued at 3% YoY (9% YoY for Inox, which benefited from a low base). The company stands to benefit from massive expansion potential, likely urban revival and possible implementation of GST.

Robust ATP, F&B and ad growth boost overall revenues

Net box office revenue jumped 18% YoY to INR2,307mn; of this, PK’s contribution was INR620mn. Of the top 15 grossing properties in India for PK, 10 belonged to PVR. Net F&B revenue jumped 35% to INR988mn. This was led by 16% volume growth and 8% pricing surge across comparable properties. PVR estimates 17-18% YoY ad growth in FY16. The company has been working on cost rationalisation in areas like electricity, repairs and other expenses, which benefited Q3FY15 margins. Interest rate for the company declined from 12.0% a couple of years ago to 11.5% due to refinancing of debt via NCDs. While gross debt stood at INR7.2bn, net debt stood at INR6.6bn.

Key takeaways from Q3FY15 conference call

PVR’s 3% YoY growth was lower versus INOX Leisure’s 9% owing to: (i) low base for Inox Leisure; (ii) closure of some properties in South for renovation; and (iii) slightly lower collections in Gujarat. Currently, spends per head (SPH) (as % of ATP) is at 36%; it can go as high as 45-50%. Ad inventory of peers is higher than PVR. It is planning to add 21 screens in Q4FY15. Over FY15E/FY16E, tax rate will be in single digits. PVR has earmarked capex of INR450-500mn for next 3 years (FY14-16) to be utilised for renovation and rebranding of Cinemax properties.

LINK
https://www.edelweiss.in/research/PVR--Blockbuster-Boost;-Result-Update-Q3FY15/28205.html