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PVR (Buy) - Revenues beat estimates - Improving return ratios to drive further re-rating




Motilal Oswal Securities Ltd.


31 May 2014





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PVR 4QFY14: Revenues beat estimates; Improving return ratios to drive further re-rating (PVRL IN, Mkt Cap USD0.4b, CMP INR578, TP INR670, 16% Upside, Buy) Results better than expected: PVRL’s 4QFY14 revenue grew 28% YoY to INR3.14b against our estimate of INR2.99b, primarily driven by strong performance of low budget films like Queen and Two States. EBITDA margin expanded 3.8pp YoY to 10.5% against our estimate of 8.3%, mainly due to higher operating leverage. PAT declined 93% YoY to INR8m against our estimate of a loss of INR118m due to exceptional gain of INR 85mn largely on account of sale of Anupam Multiplex property. The PAT decline was primarily due to lower tax credit of INR40m in 4QFY14 against INR294m in 4QFY13. The management has also taken a write off of INR 3b of goodwill from reserves and will amortise balance INR 1bn over next 10 years. Robust growth in ad revenue and footfalls: While ATP degrew by 2.4% YoY as management tried to fill various non peak hours slots to attract footfalls. The management has guided for 6% increase in ATP going forward. On a consolidated basis, total footfalls grew 20% YoY to 13.9m. SPH grew 17% YoY to INR56. Ad revenue grew 48% YoY to INR328m and management expects to grow 18-20% in FY15. Valuation and view: We remain excited about the long term growth prospects of PVR given its leadership position in movie loving nation and long term growth opportunities which the multiplex industry offers given lower screen density in the country. Post the write-off of goodwill from net worth, ROE and ROCE will improve from 10.8% in FY14 to 23.0% in FY16E and 11.1% in FY14 to 22.7% in FY16E respectively, which will further drive re-rating going forward. The stock is trading at 10.2x and 8.1x FY15E and FY16E EV/EBITDA respectively. We maintain a Buy and value PVRL at 9x FY16E EV/EBITDA and arrive at a target price of INR670.

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