Sponsorship income drives margins…. • PVR :: ICICI Securities, report

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Sponsorship income drives margins…. • PVR reported its Q3FY15 numbers with revenues coming in at | 420.3 crore, up 24.6% YoY (vs. expected | 437.4 crore). Though net ticketing revenues came in slightly lower than our estimates, there was a stellar 28.4% YoY jump in advertisement revenues to | 53.9 crore in the quarter • The EBITDA came in at | 83.1 crore, up 68.6% YoY, due to robustness in the high EBITDA contributing ad revenues. The EBITDA margins came in at 19.8% vs. our expectations of 17.1% • PAT came in higher at | 31.6 crore, more than our expectation of | 21.4 crore on account of high operating leverage PVR – No. 1 in movie exhibition space…. PVR has an impressive market share of ~25% (inclusive of Cinemax) of the total 1600 multiplex screens in the country. After the Cinemax acquisition, PVR has a combined revenue share of 20-22% (Bollywood) and 30-35% (Hollywood) of multiplex revenues. The company has about 454 screens as on date and plans to augment its market share by rolling out 70-80 screens each year. This leadership position gives the company the leverage to negotiate better deals with movie producers. We expect total screens at PVR to reach 114 properties with a total screen count of 525 and 123 properties with total screen count of 575 in FY16E and FY17E, respectively. PVR also plans to use this immense bargaining power to negotiate with the government so that there can be some minimum window before movie releases are available on other platforms. Consolidation in industry, ATPs to trend upwards There has been massive consolidation in the sector with the acquisition of Cinemax by PVR and several recent acquisitions namely: Carnival acquired Big Cinemas, Cinepolis acquired Fun Cinemas etc. The consolidation is leading to concentration of the market in the hands of three to four larger players who would in turn be in a position to take an ATP hike. We expect PVR’s ATPs to grow at a 4.2% FY14-17E CAGR to reach | 186 by FY16E. Moreover, the company is refurbishing its offerings in the food and beverage segment, which has led to higher volumes in the segment and, hence, spend per head (SPH) expansion to | 67 in the quarter. Going ahead, with the disposable income of the people increasing and improved quality of offerings by the company, the F&B spends are expected to be to the tune of | 64.0 and | 67.0 by the end of FY16E and FY17E, respectively, from | 53 in FY14. Advertisement revenue continues to grow as per expectations PVR continues to witness a yield improvement in the ad revenues per screen, which helped it clock a stellar 28.4% YoY growth in advertising revenues in the quarter to | 53.9 crore. PVR has ~ 60 million footfalls, which provides advertisers with easily reachable audience and undivided attention. Going ahead, we expect the stream to grow at 16.3% CAGR in FY14-17E to | 222.9 crore from | 141.9 crore in FY14. Maintain BUY with target price of | 780 We expect consolidated revenue and EBITDA CAGR of 13.5% & 18.4% in FY14-17E, led by ATP uptick and increased occupancies aided by the higher property roll-out. Moreover, a gradual recovery in the economic activity will increase the disposable income of the people and keep the growth buoyant. We continue to maintain BUY valuing it at 25x FY17E EPS of | 31.2 and, hence, arrive at a target price of | 780.

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http://content.icicidirect.com/mailimages/IDirect_PVR_Q3FY15.pdf