27 October 2016
Q2FY17 Results Update | Sector: Media
PVR
Buy
BSE SENSEX
27,916
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm/ Vol m
Free float (%)
S&P CNX
8,615
PVRL IN
46.7
57.4/0.9
1334/646
2/35/43
153.4 / 0.2
74.0
CMP: INR1215
TP: INR1392(+15%)
Broadly in-line results; Growth guidance intact
Financials & Valuations (INR b)
Y/E Mar
2016 2017E 2018E
Net Sales
18.7
22.2
27.0
EBITDA
3.3
3.7
5.0
PAT
1.2
1.2
2.0
EPS (INR)
25.5
26.5
42.9
Gr. (%)
664.3
3.9
61.7
BV/Sh (INR)
186.2 210.2 250.2
RoE (%)
18.7
13.4
18.6
RoCE (%)
14.5
11.2
14.8
P/E (x)
47.6
45.8
28.3
P/BV (x)
6.5
5.8
4.9
Estimate change
TP change
Rating change
Revenue broadly in line, PAT above estimates:
PVR’s overall revenues grew
17% to INR5.5b (est. of INR5.32b) from INR4.74b in 2QFY16, led by
4%/17%/35% increase in net box office revenues/food and beverages
revenues/sponsorship revenues. EBITDA margin contracted 165bp from 18.4%
in 2QFY16 to 16.8% in 2QFY17 (est. of 17.5%). EBITDA stood at INR930m (est.
of INR930m), as against INR875m in 2QFY16. Consequently, adjusted PAT stood
at INR291m in 2QFY17 (est. of INR270m), as against INR319m in 2QFY16.
Advt. revenue growth to remain healthy:
Advertisement revenue growth
improved to 35% YoY in 2QFY17 due to more Bollywood movie releases and
the company’s growing focus on value rather than volumes of advertisements.
This was mainly on account of an increase in share of Bollywood movies
compared to regional/Hollywood movies. The share of Bollywood movies
increased to 63% v/s 50% in the year-ago period. PVR held on to its earlier
guidance of 15-17% growth for the full year, with 2Q and 3Q seen as bigger
quarters in terms of Bollywood movies. With full integration of DT Cinemas in
next 4-6 months, growth can be as high as 18-20%.
DT integration to aid margin expansion:
PVR expects to take total screens
beyond 600 (including 32 DT Cinemas) in FY17 and revenue CAGR of 20% over
next two years. Located at premium areas, DT Cinemas enjoys higher ATP and
F&B SPH v/s PVR. Going ahead, F&B margins can improve significantly with
PVR’s scale and expertise coming into picture.
Valuation and view:
We expect 20% revenue CAGR and 23% EBTDA CAGR over
FY16-18. We expect overall EBITDA margins to improve from 17.7% in FY16 to
18.5% in FY18, mainly driven by synergies on the back of integration with DT
Cinemas, while GST implementation can expand EBITDA margin by 440bp
(assuming 18% GST rate). We revise our EBITDA/PAT estimates downward by
9%/4% and 7%/1% for FY17 and FY18, respectively, to factor in lower operating
margins, and value PVR at 14x FY18E EV/EBITDA. Maintain
Buy
with a target price
of INR1,392.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 39825000
Chintan Modi
(Chintan.Modi@MotilalOswal.com); +91 22 3982 5422 /
Chitvan Oza
(Chitvan.Oza@MotilalOswal.com); +9122 3010 2415
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

PVR Ltd
Revenue broadly inline, PAT above estimates
PVR reported overall revenue of INR5.5b (est. INR5.32b) as against INR4.74b in
2QFY16 marking a YoY growth of 17%.
EBITDA margins declined 165bp YoY from 18.4% in 2QFY16 to 16.8% in 2QFY17
(est. 17.5%). EBITDA stood at INR930 (est. INR930m) as against INR875m in
2QFY16.
Other income came in at INR49m in 2QFY17 against INR114m in 2QFY16.
Depreciation was lower at INR346m compared to our expectations of INR420m.
Consequently, adjusted PAT stood at INR291m in 2QFY17 (est. INR270m) as
against INR319m in 2QFY16.
Top 5 movies contributed 46% to gross Box office I n 2QFY17 compared to 51%
YoY, occupancy of top 5 movies stood at 40% vs 50% YoY.
Occupancy rate has declined from 37.1% to 32.1% in 2QFY17 YoY while footfalls
have declined by 2% to 18.5m.
Exhibit 2: EBITDA trend
YoY growth (%)
38
EBITDA (INR m)
20
17
15
15
831
4
108
1,107
23
18
17
11
875
853
1,167
465
930
Margin (%)
20
Exhibit 1: Revenue trend
Revenue (INR m)
34
25
8
9
2,996
-5
19
19
17
17
3,623 4,002 4,203
4,860 4,746 5,005 4,126 5,702 5,542
547
586
Source: MOSL, Company
Source: MOSL, Company
Exhibit 3: Property additions
105 106 107
97 101 102 102
120
109 114
121
Exhibit 4: Screens additions
Number of screens
491
444 454 454 467 474 477
524 551 557
85
33 39
26 30
351
108 123 142
166
421
Source: MOSL, Company
Source: MOSL, Company
27 October 2016
2

PVR Ltd
Exhibit 5: Seats additions
Number of seats
Exhibit 6: Quarterly footfall trend
Total patrons during the year (mn)
Source: MOSL, Company
Source: MOSL, Company
Advertisement revenue growth to remain healthy
Advertisement revenue growth improved 35% for 2QFY17 YoY due to more
Bollywood movies as well as PVR’s growing focus on value compared to more
volume of advertisements.
This was mainly on account of increase in share of Bollywood movies compared
to regional and Hollywood movies.
The share of Bollywood movies increased to 63% vs 50% YoY for 2QFY17.
PVR held on its earlier guidance of 15-17% growth for full year as 2Q and 3Q are
seen to be bigger quarters in terms of Bollywood movies.
With full integration of DT cinemas in next 4-6 months, the growth can be as
high as 18-20%.
Exhibit 8: SPH going strong
SPH (INR)
54 54 54 56
63 63 67 62
74
74 72 78
68
84
Exhibit 7: ATP continues to be robust
ATP (INR)
202
200
182 195
176 181 185 168 183 187
175
169 169
160
Source: MOSL, Company
Source: MOSL, Company
Exhibit 9: Snapshot of key matrices
Consolidated
Location
Screens
Seats
Footfalls (m)
ATP
SPH
2QFY17
121
557
127,520
18.5
202
84
2QFY16
107
477
112,499
18.8
187
68
Change %
13.1%
16.8%
13.4%
-1.6%
8.0%
23.5%
1QFY17
120
551
126,377
20.7
195
78
Change %
0.8%
1.1%
0.9%
-10.6%
3.6%
7.7%
Source: Company, MOSL
27 October 2016
3

PVR Ltd
Exhibit 10: Consolidated revenue break up (INR m)
Particulars
Ticket sales
Sale of Food and beverages
Advertisement and royalty income
2QFY17
2,781
1,396
624
2QFY16
2,662
1,196
461
Change %
4.5%
16.8%
35.3%
1QFY17
3,056
1,475
515
Change %
-9.0%
-5.3%
21.2%
Source: Company, MOSL
Guidance intact for full year, DT integration to aid margin expansion
PVR expects to take total screens beyond 600 (including 32 DT cinemas) in FY17
and revenue CAGR of 20% over next two years.
DT cinemas being located in premium location enjoys higher ATP and F&B SPH
vs PVR.
Going ahead F&B margins can improve significantly with PVR’s scale and
expertise coming into picture.
Conference call takeaways
Advertisement spends:
Advertisements mainly depends on perception of films.
PVR has contracts with some clients where advertisement revenues are linked
to footfalls; though majority contracts mainly work on star power of the movie.
PVR is more focused on value from advertisement rather than volume to not
disrupt the consumer experience. It charges a blockbuster premium for all the
bigger films (to the extent of 75%-100%).
High Advertisement revenue:
2QFY17 had very little regional content and more
of Bollywood films due to which ATP has increased YoY. The mix of
Bollywood/Hollywood/Regional movies stood at 63%/15%/22% in 2QFY17,
compared to 50%/16%/34% in 2QFY17 due to which ATP has increased.
F&B:
Revenues increased by 17% YoY for 2QFY17 wherein ~60% of growth was
attributable to value increase due to price rise while 40% to volume increase.
The management believes double digit growth is possible for next few years and
intends to increase SPH as a % of current ATP from ~40% to 50% going ahead.
Premium/ Luxury segment:
Some premium customers look for luxury and
experience in a theatre; PVR has ~30 screens having 30-100 seat capacity to
cater to this segment. Currently, it accounts for 6% of screens which it intends
to grow to 10% going ahead.
DT Cinemas:
DT cinemas being located in premium location enjoys higher ATP
and F&B SPH vs PVR. Currently, it contributes to less than 10% of revenues. Few
screens remained closed during the quarter while some have been renovated to
capture footfalls for Diwali. Synergies will continue to increase with PVR mainly
from FY18.
Competition:
All competitors (Inox, Cinepolis, Carnival) are aggressively eyeing
screens and bidding for similar properties due to which rental cost may get
impacted in long run.
Interest rate:
10.25% is average blended interest cost at the company level.
Outlook:
PVR is targeting to open 58 new screens instead of 65 by end of FY17.
With more movies lined up for 2HFY17, the management expects a better
2HFY17 growth compared to 1HFY17.The management expects to take total
screens beyond 600 (including 32 DT cinemas) in FY17 and has guided for a
revenue CAGR of 20% over next two years.
27 October 2016
4

PVR Ltd
Valuations and view: Maintain ‘Buy’
We value PVRL at 14x FY18E EV/EBITDA with a target price of INR1,392 justified by:
Continued leadership in film exhibition business in India.
Significant screen additions in the pipeline.
Strong content outlook going forward.
GST rollout which can result in 400-500bp margin expansion.
We believe the following factors pose risks to our assumptions:
Weaker content which can reduce footfall growth.
Slower than expected roll out of GST which can delay margin expansion.
Escalating rental costs which can put pressure on margins.
Continued price controls by state governments in several states like TN and AP.
Exhibit 11: Target Price Methodology
Valuations
EBITDA- FY18E
Target Multiple
Target Enterprise Value
Net Debt
Target Market cap
No of shares
Value per share
(INR m)
4,988
14.0
69,833
4,858
64,975
46.7
1,392
Source: MOSL
27 October 2016
5

PVR Ltd
Story in charts
Exhibit 12: India has the lowest screen density
Screen / mn population
61
77
125
Exhibit 13: Multiplex penetration still quite low
Single Screen
888
Multiplexes
31
8
38
43
45
46
52
53
960
1104
1400
1700
8700
8600
8100
7700
7700
2010
Source: MOSL, Company
2011
2012
2013
2014
Source: MOSL, Company
Exhibit 14: PVR is India’s largest multiplex chain
421
348
No of screens (FY14 end)
259
84
82
Exhibit 15: PVR – most aggressive screen additions
Number of screens
603
421
464
516
658
351
29
166
FY12
Source: MOSL, Company
FY13
FY14
FY15
FY16
FY17E
FY18E
Source: MOSL, Company
Exhibit 16: RoCE to improve significantly
RoCE (%)
14.5
10.9
8.5
10.7
8.0
11.2
14.8
Exhibit 17: Free cash to improve significantly
Free cash flow (INR m)
3,106
859
680
-153
FY12
FY13
FY14
FY15
FY16E
FY17E
FY18E
FY11
-841
-68
FY12
FY13
FY14
-384
-2,306
FY15 FY16E FY17E FY18E
Source: MOSL, Company
Source: MOSL, Company
27 October 2016
6

PVR Ltd
Exhibit 18: Upcoming Content
Exhibit 19: Upcoming Content
27 October 2016
7

PVR Ltd
Exhibit 20: Upcoming Content
Source: MOSL, Company
Exhibit 21: Upcoming Content
Source: MOSL, Company
27 October 2016
8

PVR Ltd
Exhibit 22: Upcoming Content
Source: MOSL, Company
Exhibit 23: Upcoming Content
Source: MOSL, Company
27 October 2016
9

PVR Ltd
Key operating metrics
Operating matrices
Location
Screens
Screens additions during the quarter
Seats
Footfalls (m)
ATP (INR)
SPH (INR)
Q3FY15
102
454
0
107,292
16.0
185
67
Q4FY15
105
467
13
110,524
12.2
168
62
1QFY16
106
474
7
111,278
19.0
183
74
2QFY16
107
477
3
112,499
18.8
187
68
3QFY16
109
491
14
114,634
16.5
200
74
4QFY16
114
524
33
119,673
15.3
182
72
1QFY17
120
551
27
126,377
20.7
195
78
2QFY17
121
557
6
127,520
18.5
202
84
Consolidated revenues (INR mn)
Ticket sales (INR m)
Sale of Food and beverages (INR m)
Advertisement and royalty income (INR
m)
Other income
Total revenues (INR mn)
Q3FY15
2,307
1,006
539
123.5
3,975
Q4FY15
1,579
692
381
83.3
2,735
1QFY16
2,667
1,298
457
224
4,645
2QFY16
2,662
1,196
461
201
4,520
3QFY16
2,512
1,136
693
209
4,550
4QFY16
2,144
1,037
455
234
3,869
1QFY17
3,056
1,475
515
379
5,425
2QFY17
2,781
1,396
624
326
5,127
Revenue mix
Ticket sales
Sale of Food and beverages
Advertisement and royalty income
Other income
Total revenues
Q3FY15
58%
25%
14%
3%
100%
Q4FY15
58%
25%
14%
3%
100%
1QFY16
57%
28%
10%
5%
100%
2QFY16
59%
26%
10%
4%
100%
3QFY16
55%
25%
15%
5%
100%
4QFY16
55%
27%
12%
6%
100%
1QFY17
56%
27%
9%
7%
100%
2QFY17
54%
27%
12%
6%
100%
Key Assumptions
Number of Screens
Screen additions
Number of seats
Occupancy rate
Number of shows per day
Total footfalls (m)
Average ticket price (INR)
ATP growth (YoY)
Spend per head (INR)
SPH growth (YoY)
Ad revenue per screen (NR/m)
FY14
421
70
101,095
31%
5.4
60
168
3%
54
15%
3.7
FY15
464
43
110,524
30%
5.0
59
177
5%
64
19%
3.8
FY16
516
52
119,673
35%
5.0
64
188
6%
72
13%
4.2
FY17E
603
55
137,540
33%
5.1
73
201
7%
83
15%
4.7
FY18E
658
55
148,815
35%
5.1
84
217
8%
96
16%
5.2
27 October 2016
10

PVR Ltd
Financials and Valuations
Consolidated - Income Statement
Y/E March
Net Sales
Change (%)
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income - Rec.
PBT bef. EO Exp.
EO Expense/(Income)
PBT after EO Exp.
Current Tax
Deferred Tax
Tax Rate (%)
Less: Minority Interest
Reported PAT
PAT Adj for EO items
Change (%)
Margin (%)
FY14
13,475
67.3
2,117
15.7
944
1,173
795
113
491
32
523
140
-121
3.7
57
560
530
14.5
3.9
FY15
14,771
9.6
2,008
13.6
1,168
840
783
89
146
-22
125
2
6
6.5
11
128
148
-72.1
1.0
FY16
18,688
26.5
3,299
17.7
1,252
2,047
839
283
1,491
67
1,425
232
0
16.3
0.0
1,193
1,248
744
6.7
FY17E
22,202
18.8
3,708
16.7
1,486
2,222
770
200
1,652
0
1,652
413
0
25.0
0.0
1,239
1,239
-0.8
5.6
(INR Million)
FY18E
26,963
21.4
4,988
18.5
1,796
3,193
701
180
2,671
0
2,671
668
0
25.0
0.0
2,003
2,003
61.7
7.4
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Deferred Liabilities
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Intangible assets- Goodwill
Net Fixed Assets
Capital WIP
Total Investments
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Provisions
Net Current Assets
Appl. of Funds
FY14
411
3,582
3,993
771
4
6,133
10,902
11,889
3,723
31
8,197
806
235
4,294
106
523
273
3,392
2,631
2,392
239
1,663
10,902
FY15
415
3,677
4,092
383
11
7,470
11,956
13,356
4,784
31
8,604
611
19
5,055
126
767
267
3,895
2,333
2,161
172
2,723
11,955
FY16
467
8,228
8,695
401
93
6,623
15,812
16,639
6,036
52
10,655
0
2,446
6,007
205
901
244
4,658
3,296
3,051
245
2,711
15,812
FY17E
467
9,347
9,814
401
93
7,373
17,682
22,469
7,522
52
14,999
222
0
6,245
136
973
245
4,890
3,784
3,527
257
2,461
17,682
(INR Million)
FY18E
467
11,215
11,682
401
93
5,373
17,550
24,169
9,317
52
14,903
270
0
6,995
163
1,182
515
5,135
4,618
4,307
311
2,377
17,550
27 October 2016
11

PVR Ltd
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Asset Turnover (x)
Inventory (Days)
Debtor (Days)
Creditor (Days)
Working Capital Turnover (Days)
Leverage Ratio (x)
Current Ratio
Debt/Equity
FY14
15.0
35.8
97.1
4.0
21.5
FY15
3.3
31.7
98.5
1.6
39.5
FY16
25.5
53.6
186.2
3.1
7.7
FY17E
26.5
58.4
210.2
4.0
9.6
FY18E
42.9
81.4
250.2
4.5
6.8
81.0
33.9
12.5
4.7
29.9
0.3
363.5
38.3
12.3
4.4
32.2
0.1
47.6
22.7
6.5
3.4
19.3
0.3
45.8
20.8
5.8
2.9
17.4
0.3
28.3
14.9
4.9
2.3
12.5
0.4
11.8
10.7
10.7
1.2
3
14
65
38
3.4
8.0
7.6
1.2
3
19
53
61
18.7
14.5
14.2
1.2
4
18
60
48
13.4
11.2
11.0
1.3
2
14
58
36
18.6
14.8
14.1
1.5
2
14
58
25
1.6
1.5
2.2
1.8
1.8
0.8
1.7
0.8
1.5
0.5
Consolidated - Cash Flow Statement
Y/E March
Net Profit / (Loss) Before Tax / EO
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
EO Expense
CF from Operating incl EO
(inc)/dec in FA
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Add: Beginning Balance
Closing Balance
FY14
523
944
743
-154
91
2,147
-15
2,132
-1,273
193
14
-1,065
121
-434
-812
-46
9
-1,162
-95
368
272
FY15
125
1,168
783
-69
-863
1,144
163
1,307
-1,691
-131
14
-1,808
100
1,337
-827
-122
8
496
-6
272
267
FY16
1,425
1,252
839
-232
-12
3,272
81
3,353
-2,672
-2,427
0
-5,099
3,502
-847
-839
-92
0
1,724
-23
267
243
FY17E
1,652
1,486
770
-413
252
3,746
0
3,746
-6,052
2,446
0
-3,606
0
750
-770
-119
0
-139
2
243
245
FY18E
2,671
1,796
701
-668
354
4,854
0
4,854
-1,748
0
0
-1,748
0
-2,000
-701
-135
0
-2,836
270
245
515
27 October 2016
12

PVR Ltd
Corporate profile
Company description
Exhibit 1: Sensex rebased
PVR, a pioneer in multiplex development in India, is
the largest cinema exhibition player in the country
today. Post the acquisition of Cinemax, PVR has
become India’s largest multiplex chain with 102
properties, 454 screens and 108k seats. Being the
only player that is still expanding aggressively, it is
further extending its leadership.
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Sep-16
Promoter
DII
FII
Others
25.3
28.8
32.6
13.4
Jun-16
25.3
29.6
30.6
14.5
Sep-15
26.3
14.0
25.4
34.3
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Plenty Private Equity I Fund Ltd
Reliance Capital Trustee Co Ltd A/c Reliance
Equity Opportunities Fund
Multiples Private Equity I Fund Ltd
Major Cineplex Group Public Company Ltd
Baron Emerging Markets Fund
% Holding
8.9
8.7
6.3
4.0
3.2
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Ajay Bijli
Sanjeev Kumar
N C Gutpa
Designation
Chairman & Managing
Director
Joint
Managing
Director
Company Secretary
Exhibit 5: Directors
Name
Amit Burman
Sanjai Vohra
Vicha Poolvaraluk
Sanjay Kapoor
Name
Renuka Ramnath
Sanjay Khanna
Vikram Bakshi
*Independent
Source: Capitaline
Exhibit 6: Auditors
Name
KPMG
S R Batliboi & Co LLP
Internal
Statutory
Type
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
26.5
42.9
Consensus
forecast
29.8
40.5
Variation (%)
-11.0
6.1
Source: Bloomberg
Source: Capitaline
27 October 2016
13

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14