3 January 2017
Update
| Sector:
Media
PVR
BSE SENSEX
26,643
S&P CNX
8,192
Buy
Demonetization impact lower than initial expectations
The movie ‘Dangal’ was a savior; Maintaining Buy
CMP: INR1,167
TP: INR1,429(+22%)
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
PVRL IN
46.8
1,334 / 646
5/17/45
49.4
0.7
145
74.8
Financials Snapshot (INR b)
Y/E Mar
2016 2017E 2018E
Net Sales
18.7
21.2
26.0
EBITDA
3.3
3.5
4.8
PAT
1.2
1.0
1.7
EPS (INR)
25.5
20.4
35.8
Gr. (%)
664.3 -20.2
75.9
BV/Sh (INR)
186.2 204.0 234.4
RoE (%)
18.7
10.4
16.4
RoCE (%)
14.5
8.8
12.4
P/E (x)
45.7
57.3
32.6
P/BV (x)
6.3
5.7
5.0
Shareholding pattern (%)
As On
Sep-16 Jun-16 Sep-15
Promoter
25.3
25.3
26.3
DII
28.8
29.6
14.0
FII
32.6
30.6
25.4
Others
13.4
14.5
34.3
FII Includes depository receipts
Stock Performance (1-year)
PVR
Sensex - Rebased
1,350
1,100
850
600
‘Dangal’ crosses INR2.4b NBO collection, PVR has 20% market share:
The
Hindi film Dangal reported stellar net box office collection (NBO) of ~INR2.4b
until 31-December 2016 in India, which is expected to aid PVR (~20% market
share, according to management) in the current quarter. Stellar numbers by
Dangal show that demonetization cannot have much impact on the multiplex
business if content is good. No competition from other Hindi cinemas over last
weekend and the holiday season contributed to Dangal’s continued successful
run at the box office. The movie pipeline also appears strong with Shahrukh
Khan’s ‘Raees’ scheduled to be released on 26-January 2017 along with Hrithik
Roshan’s ‘Kaabil’.
Impact of demonetization lower than initially expected:
In 3QFY17, we
broadly expect average ticket prices (ATP) to remain flattish given poor content
overall (except for Dangal), SPH improvement of ~5%, and advertisement
income increase of 10-11%. Footfalls are expected to decline by 5-6% and SSG
by ~3%, which is lower than initial expectations. Considering addition of 32
screens from DT Cinemas (was not part of the base quarter, i.e. 3QFY16), we
expect 10% YoY revenue growth in 3QFY17. It is important to note that the
base quarter was very strong with footfall growth of 19.7% to 18.8m and
occupancy at 37%, led by strong content like Bajrangi Bhaijaan, Baahubali,
Welcome Back, Drishyam and MI Rogue Nation (contributing 51% of net box
office collection).
DT integration completed, to be rebranded to PVR:
According to
management, the integration of DT Cinemas with PVR is now complete, which
adds to 32 screens to PVR and is expected to take total screens beyond 600 in
FY17. DT Cinemas being located at premium location enjoys higher ATP and
F&B SPH v/s PVR. We note that all DT Cinemas screens will be rebranded to
PVR. In our view, F&B margin can expand significantly with PVR’s scale and
expertise coming into play.
Valuation and view:
We expect the impact of demonetization to be lower than
our previous estimates. We thus increase our earnings estimates by 22% for
FY17 (was mainly cut because of impact on operating leverage in view of
demonetization) while broadly maintaining FY18 estimates. We introduce FY19
estimates, and expect 21% revenue CAGR and 29% PAT CAGR over FY16-19E,
driven by EBITDA margin. We expect overall EBITDA margin to improve from
17.7% in FY16 to 19% in FY19, mainly driven by synergies from DT Cinemas
integration. We roll over our valuation to December-18 with target multiple of
12x EV/EBITDA (earlier 14x FY18E), and maintain
Buy
with a target price of
INR1,429, implying upside of 22%.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 6129 1535
Chintan Modi
(Chintan.Modi@MotilalOswal.com); +91 22 6129 1554

PVR
Story in charts
Exhibit 1: India has the lowest screen density
Screen / mn population
61
77
125
Exhibit 2: 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 3: PVR is India’s largest multiplex chain
421
348
No of screens (FY14 end)
259
84
82
Exhibit 4: PVR – most aggressive screen additions
Number of screens
516
603
658
713
29
351
166
421
464
FY12
Source: MOSL, Company
FY13
FY14
FY15
FY16
FY17E FY18E FY19E
Source: MOSL, Company
Exhibit 5: RoCE to improve significantly
RoCE (%)
14.5
10.9
8.5
10.7
8.0
8.8
17.8
12.4
Exhibit 6: Free cash to improve significantly
Free cash flow (INR m)
2,879
859
-384
680
3,794
FY12
FY13
FY14
FY15
FY16E FY17E FY18E FY19E
Source: MOSL, Company
-2,889
FY11 FY12 FY13 FY14 FY15 FY16E FY17E FY18E FY19E
Source: MOSL, Company
-153
-841
-68
3 January 2017
2

PVR
Exhibit 7: 121 Properties as on end of 2QFY17
Properties
53
44
Exhibit 8: 557 screens as on end of 2QFY17
Screens
223
191
125
19
5
West
East
North
South
West
18
East
North
South
Source: MOSL, Company
Source: MOSL, Company
Exhibit 9: 1,27,520 Seats as on end of 2QFY17
Seats
54,978
41,436
26,316
4,790
West
East
North
South
Exhibit 10: E Tax Exempt Screens
E Tax Exempt Screens
557
14
Total Screens
Partial Exempt
Screen
76
Full Exempt Screen
Source: MOSL, Company
Source: MOSL, Company
Exhibit 11: Property Openings in FY17
Cinemas
PVR Singapore Mall, Lucknow
PVR Orion Mall Panvel
PVR Xperia Dombivali Mumbai
PVR Grand Glada Chennai
PVR EVA Mall Vadodara
PVR Parsvnath Mall Moradabad
PVR GSRTC Ahmedabad
PVR Ozone Galleria, Ranchi
PVR ICC Pune
PVR City One Mall Pimpri Pune
PVR K3C Mall, Karnal
PVR Cinemall, Kota
PVR DLF Emporio Mall
Total FY16-17
Screens
3
5
6
5
5
3
7
4
6
5
3
3
3
58
Opening Date
3-May-16
24-May-16
5-Aug-16
Q3, FY16-17
Q3, FY16-17
Q3, FY16-17
Q4, FY16-17
Q4, FY16-17
Q4, FY16-17
Q4, FY16-17
Q4, FY16-17
Q4, FY16-17
Q4, FY16-17
Source: MOSL, Company
3 January 2017
3

PVR
Exhibit 12: Released Content
Source: MOSL, Company
Exhibit 13: Released Content
Source: MOSL, Company
Exhibit 14: Released Content
Source: MOSL, Company
3 January 2017
4

PVR
Exhibit 15: Released Content
Source: MOSL, Company
Exhibit 16: Mix of Released and Upcoming Content
Source: MOSL, Company
Exhibit 17: Upcoming Content
Source: MOSL, Company
3 January 2017
5

PVR
Valuations and view – Maintain ‘Buy’
We roll over to Dec’2018 and value PVRL at 12x EV/EBITDA with a target price of
INR1,429 justified by:
Continued leadership in film exhibition business in India.
Significant screen additions in the pipeline.
Strong content outlook going forward.
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 governments in several states like TN and AP.
Exhibit 18: Target Price Methodology
Valuations
EBITDA- Dec-18
Target Multiple
Target Enterprise Value
Net Debt
Target Market cap
No of shares
Value per share
(INR m)
5,881
12.0
70,570
3,873
66,697
46.7
1,429
Source: MOSL
3 January 2017
6

PVR
Key operating metrics
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)
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
31%
5.0
70
199
6%
81
12%
4.7
FY18E
658
55
148,815
36%
5.0
81
216
9%
94
16%
5.2
FY19E
713
55
160,090
35%
5.0
95
231
7%
105
12%
5.2
3 January 2017
7

PVR
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
21,199
13.4
3,477
16.4
1,486
1,991
759
200
1,431
0
1,431
479
0
33.5
0.0
952
952
-23.8
4.5
(INR Million)
FY18E
26,046
22.9
4,845
18.6
1,796
3,049
712
180
2,517
0
2,517
843
0
33.5
0.0
1,673
1,673
75.9
6.4
FY19E
32,769
25.8
6,226
19.0
1,926
4,300
462
162
3,999
0
3,999
1,340
0
33.5
0.0
2,660
2,660
58.9
8.1
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
9,056
9,522
401
93
8,123
18,140
22,469
7,522
52
14,999
212
0
6,188
125
755
418
4,890
3,259
2,997
262
2,929
18,140
(INR Million)
FY18E
467
10,476
10,943
401
93
6,123
17,560
24,169
9,317
52
14,903
260
0
6,760
152
1,142
332
5,135
4,364
4,028
336
2,397
17,560
FY19E
467
12,742
13,209
401
93
3,123
16,826
25,869
11,244
52
14,677
328
0
7,288
190
1,436
270
5,392
5,466
5,044
423
1,822
16,826
3 January 2017
8

PVR
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
77.8
32.6
12.0
4.7
29.9
0.3
11.8
10.7
10.7
1.2
3
14
65
38
1.6
1.5
FY15
3.3
31.7
98.5
1.6
39.5
349.2
36.8
11.8
4.4
32.2
0.1
3.4
8.0
7.6
1.2
3
19
53
61
2.2
1.8
FY16
25.5
53.6
186.2
3.1
7.7
45.7
21.8
6.3
3.4
19.3
0.3
18.7
14.5
14.2
1.2
4
18
60
48
1.8
0.8
FY17E
20.4
52.2
204.0
4.0
13.0
57.3
22.4
5.7
3.1
18.7
0.3
10.4
8.8
8.6
1.2
2
11
52
43
1.9
0.9
FY18E
35.8
74.3
234.4
8.1
15.1
32.6
15.7
5.0
2.4
13.0
0.7
16.4
12.4
11.8
1.5
2
14
56
29
1.5
0.6
FY19E
57.0
98.2
282.9
12.6
14.8
20.5
11.9
4.1
1.8
9.7
1.1
22.0
17.8
17.2
1.9
2
14
56
17
1.3
0.2
Consolidated - Cash Flow Statement (INR Million)
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
1,431
1,486
759
-479
-44
3,153
0
3,153
-6,042
2,446
0
-3,596
0
1,500
-759
-124
0
617
174
243
417
FY18E
2,517
1,796
712
-843
446
4,628
0
4,628
-1,748
0
0
-1,748
0
-2,000
-712
-253
0
-2,965
-86
417
331
FY19E
3,999
1,926
462
-1,340
513
5,561
0
5,561
-1,767
0
0
-1,767
0
-3,000
-462
-394
0
-3,856
-62
331
270
3 January 2017
9

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PVR
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PVR
No
No
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In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
Varun Kumar
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Motilal Oswal Securities Ltd
3 January 2017
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