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Showing posts with label PVR LTD. Show all posts
Showing posts with label PVR LTD. Show all posts

Sunday, July 3, 2016

PVR LTD: IT'S JUST THE BEGINNING !!



*As the author of this blog I disclose that I do hold PVR LTD in my investment portfolio.

Scrip Code:532689PVR
CMP:  Rs. 1024.50; Market Cap: Rs. 2,477.92 Cr; 52 Week High/Low: Rs. 1074.00 / Rs. 632.25.
Total Shares: 4,66,86,938 shares; Promoters : 1,20,11,149 shares –25.73 %; Total Public holding : 3,46,75,789 shares – 74.27 %; 
Total Debt: Rs. 747.01 Cr;

PVR LTD:

Investment Rationale:
Priya Village Roadshow (PVR) Cinemas

 

PVR MILAP, Kandivali, Mumbai  

PVR is the largest and the most premium film entertainment Company in India and is listed as the “Most Trusted Brand” in the Category of Entertainment by the “Brand Trust Report, 2013”. PVR, a pioneer in multiplex in India and is the largest cinema exhibition player in the country today. PVR was the pioneer in opening of the first multiplex in India and this opened up a new era in the Indian cinema viewing experience, which also set a role model for others to follow suit. PVR has set new benchmarks in the cinema exhibition business including establishment of the first largest 11 screen multiplex in the country, Gold Class Cinema, luxury cinema, IMAX theatres and ECX (Enhanced Cinema Experience). PVR has an impressive market share of around 25 % including Cinemax of the total 1600 multiplex screens in the country. Recently on June 29, 2016, the Union Cabinet cleared the Model Shops and Establishment (Regulation of Employment and Conditions of Service) Bill, 2016. This law will allow shops, malls and cinema halls, among other establishments to run 24×7 throughout the year. It covers establishments employing 10 or more workers except manufacturing units and will provide freedom to operate 365 days with flexibility on timing to open and close.
Moreover, a gradual recovery in economic activity will increase disposable incomes to keep growth buoyant. , the stock P/E ratio is at 38.08 x FY15E and 23.81 x FY16E respectively. PVR can post EPS of Rs. 30.30 for FY17E and Rs. 33.80 for FY18E. The content pipeline of the company is exciting and would propel the further growth of PVR. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also.

KEY FINANCIALSFY15FY16EFY17EFY18E
SALES (  1,476.901,873.602,178.602,515.50
NET PROFIT (₹ Cr)13.30125.40140.90157.10
EPS () 3.2026.9030.3033.80
PE (x)261.9031.3027.7024.90
P/BV (x)7.804.303.703.30
EV/EBITDA (x)21.5013.7011.509.80
ROE (%) 2.90 18.5014.4014.20
ROCE (%)7.2015.2016.3015.80

As I always say, I am a long term believer in markets & I do respect the markets and will keep a  on every purchase(Why Strict stop loss of 8 % ?) -  

*As the author of this blog I disclose that I do hold  PVR LTD in my of the portfolios. 

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Disclaimer
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.  




As a Disclosures I Confirm that : 
I confirm that I shall not deal or trade in securities mentioned in this article within thirty days before and five days after the publication of this article. I also confirm that I will not deal or trade directly or indirectly in securities mentioned in this article in a manner contrary to the ideas put forth in the article. I have not received any financial compensation for writing this article.

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Monday, April 13, 2015

PVR LTD : LIGHT CAMERA & ACTION !!!

Scrip Code: 532689PVR
CMP:  Rs. 668.85; Market Cap: Rs. 2,768.83 Cr; 52 Week High/Low: Rs. 750.00 / Rs. 490.0o; Total Shares: 4,13,96,888 shares; Promoters : 1,22,55,260 shares –29.60 %; Total Public holding : 2,91,41,628 shares – 70.40 %; Book Value: Rs. 94.32; Face Value: Rs. 10.00; EPS: Rs. 13.39; Dividend: 25.00% ; P/E: 49.98 times; Ind P/E: 36.93; EV/EBITDA: 15.34. Total Debt: 502.12 Cr; Enterprise Value: Rs. 3,258.38 Cr.

Priya Village Roadshow (PVR) Cinemas: PVR Limited was incorporated in 1995 and is based in Gurgaon, India. PVR LTD was incorporated in April 1995 pursuant to a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow Limited, one of the largest exhibition companies in the world. PVR Limited is an India-based company that operates movie houses in India. PVR Ltd came with an IPO on December 08, 2005 with an issue price of Rs. 225 per share and raise about Rs. 173.25 Cr with an objective to utilize the proceeds to finance the then new cinema projects in various cities across the country, to expand the film distribution business, technological up gradation and renovation of cinemas. The Company also generates revenue from in-cinema advertisements and product displays and in-cinema sale of food and beverages. It also produces and co-produces movies; and distributes movies, as well as operates 24 lane bowling centres. PVR, Currently controls 398 including 135 Screens with Cinemax India Ltd at 92 locations across 37 cities in 13 States and 1 Union Territory. Company’s subsidiaries include CR Retail Malls (India) Limited (CRR), PVR Pictures Limited (PVR Pictures) and PVR bluO Entertainment Limited (PVR bluO). The Company has diverse cinema circuit in India consisting of 35 Cinemas with 154 screens spread over 20 different cities: Delhi, Faridabad, Gurgaon, Ludhiana, Ghaziabad, Mumbai, Bangalore, Hyderabad, Chennai, Lucknow, Indore, Aurangabad, Baroda, Allahabad, Ahmedabad, Udaipur, Chandigarh, Surat, Latur and Raipur. PVR Ltd announced the opening of a multiplex on August 15, 2012, at Empress Mall, in Nagpur in the state of Maharashtra. The multiplex consists of five screens. On January 8, 2013, PVR through its wholly owned subsidiary Cine Hospitality Private Ltd purchased a controlling stake of over 69 % followed by the open offer for another 26% in the Cinemax India Limited for Rs. 395 Cr or Rs. 203.65 per share from the Rashesh Kanakia and family. PVR Ltd is locally compared with Prime Focus ltd, Reliance Broadcast Network Ltd, Balaji Telefilms ltd, Media Matrix Worldwide Ltd, Shree Ashtavinayak Cine Vision Ltd, Tips Industries Ltd, Fame India Limited, Cinemax Properties Ltd, Era E Zone (India) Ltd, Pyramid Saimira Theatre Limited and Inox Leisure Ltd and globally compared with Walt Disney Co of US California, Time Warner Inc of USA, IG Port Incorporated of Japan, Twenty First Century Fox, Inc of New York, Lions Gate Entertainment Corp of California,  UTV Media PLC of UK, Dreamworks Animation Skg Inc of California, Orange Sky Golden Har. Ente. Holdings Ltd of Hong Kong, Kinepolis Group NV of Belgium, Cinemax X AG of Germany, Digital Cinema Destination Corp of United States and Reading International Inc of United states, Geo Dinos Company Ltd of Japan, Nakanihon Kogyo Company Ltd of Japan.

Investment Rationale: 
Priya Village Roadshow (PVR) Cinemas is a leading cinema chains in India. The company began as a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow limited in 1995 with 60:40 ratios. PVR pioneered the multiplex revolution in the country by establishing the first multiplex cinema in 1997 at Saket, New Delhi. The opening of the first multiplex opened up a new era in the Indian cinema viewing experience, which also set a role model for others to follow suit. PVR has set new benchmarks in the cinema exhibition business including establishment of the first largest 11 screen multiplex in the country, Gold Class Cinema, luxury cinema, IMAX theatres and ECX (Enhanced Cinema Experience). PVR, Currently controls 398 including 135 Screens with Cinemax India Ltd at 92 locations across 37 cities in 13 States and 1 Union Territory. It also plans to open another 500 screens by 2015. PVR has an impressive market share of around 25 % including Cinemax of the total 1600 multiplex screens in the country. The Indian Media and Entertainment (M&E) industry is around Rs. 83,000 crore (US$ 13.23 billion) and is on high growth trajectory. Proving its resilience when the global economy was going through tough times, the Indian M&E sector was on the cusp of a strong phase of growth, backed by rising consumer payments and advertising revenues across all sectors. The industry has been largely driven by increasing digitisation and higher internet usage over the last decade. In today’s times, the Indian entertainment segment is largely driven by digitisation and internet penetration. More than 22.7 Cr Indians use their mobiles, computers, tablets or other devices to access internet to listen to music, watch a film, a TV show or a cricket match. India ranks third in the world in watching videos online through a PC/laptop and fourth in the world when it comes to watching videos on the phone, according to the statistics. The CII-PwC report named 'India Entertainment & Media Outlook 2013' estimates that the Indian M&E industry would exceed Rs. 224,500 crore (US$ 35.8 billion) by 2017, growing at a CAGR of 17 per cent from 2013. The growth would be majorly driven by increasing penetration of digital platforms across the industry segments. While the print sector is expected to register a CAGR of 9 % and touch Rs 33,100 crore (US$ 5.28 billion) of revenues by 2017, sectors such as internet access, internet advertising, gaming and music are expected to continue on their high growth trajectory, said the report. The report highlighted that immense use of the internet, high penetration of smart phones; digital advertising, wireless broadband, digital content consumption and supportive regulatory eco-system have had and will continue to have a significant impact on the E&M sector. PVR has an impressive market share of 25 % including share of Cinemax and has the total of 1,600 multiplex screens in the country. After the Cinemax acquisition, PVR now has a combined revenue share of 20-22 % from Bollywood films and 30-35 % from Hollywood films as in multiplex revenues. The company has about 462 screens as on date and plans to raise its market share by rolling out 70-80 screens each year. This leadership position gives PVR the leverage to negotiate better deals with movie producers. It is expected that in FY16E the total screens of PVR can reach 525 in 114 properties and in FY17E the total number of screens could be 575 in 123 properties. The Annual maintenance capex comes at 1-2 % of revenue. Every screen requires refurbishment after 6-8 years to keep the cinema maintained and fresh. This amounts to 20-30 % of original capex. Capex required is on an average of Rs. 2.5 Cr per screen. 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. Owing to its strong competitive position after the Cinemax acquisition the company has been able to effectively pass on price hikes. The average ticket prices (ATPs) have been on an upward trajectory since FY13. As the demand for the movies are increasing so do the investments in movies are increasing. Hence, there would be an increase in ATPs. Moreover, the consolidation in the multiplex industry and with PVR being a market leader it would be in best position and be able to pass on price hikes effectively. Also, there are some major releases in the pipeline and several Hollywood releases would help PVR to take price hikes as per the heavy demands for star-studded movies. It is expected that Average Ticket Prices to grow at a CAGR of 4.2 % to Rs. 186.4 by FY17E. PVR also benefits from its strategy of following differentiation pricing based on the regions, target audience and the movie to be released. PVR has always remained quite consistent with its property roll-out guidance. The company has the first mover advantage in various smaller towns and cities where it has already cornered the best location. In Q4FY13, as the Cinemax numbers were consolidated the tally of the properties increased from 47 to 86. As on date, the company has 104 properties with 462 screens in total. The company has rolled out about 73 screens at the end of FY14. The company guided at maintaining the run rate of 70-80 screens for the coming two years. PVR has 60 million footfalls, which makes advertisers comfortable to advertise with PVR as the audience is also easily traceable. PVR is strategising to augment its advertising revenues by about 25-30 % on a YoY basis by providing advertisers various deals such as pay per eyeballs and other innovative deals. The company has earned about Rs. 141.9 crore in FY14. There is also an uptrend seen in the Spends per head in the food and beverage (F&B) segment. This gives PVR an ability to take price hikes and higher operating leverage in the coming future and this will in turn help in the margin expansion to the tune of about 17.2 % in FY16E and 18.1 % for FY17E from 16.0 % in FY14. PVR has entered into a share purchase agreement with L Capital for purchase of their entire investment in equity shares and preference shares of PVR Leisure. L Capital had bought the stake at Rs. 50 Cr in 2012. L Capital will be exiting its investment at a loss and PVR will be buying its stake at Rs. 37 Cr. Since PVR Leisure has Rs. 15 Cr to Rs. 16 Cr cash, net outflow for PVR will be Rs. 22 Cr. Apart from one property scheduled to be opened in Ludhiana in the next 23 months, PVR will not be expanding further in the bowling business. L Capital will continue to be a significant shareholder in the main company. Also, PVR Cinemas has entered into a 5 year strategic partnership with BookMyshow.com to be its online ticketing partner across India. The multiplex targets to sell tickets worth of Rs. 1000 crores over these five years exclusively on BookMyshow.com besides its existing sale of tickets from its Box Office and other channels. Also with the GST coming into force by 2016 and the GST rate being fixed at 16 %, it could potentially lead to a 4.50 % to 5.50 % improvement in EBITDA margin for PVR. Given the fact that movie watching is a discretionary spend and the category has pricing power, so PVR will be in good position to absorb all benefits of GST rather than passing it on to consumers. PVR’s has good prospects with improvement in RoCE and RoE with free cash flow visibility and with the timely execution of the given aggressive roll-out plan it will maintain its leadership position.

Outlook and Valuation:
Innovative ways to book tickets
via online and app
PVR is the largest and the most premium film entertainment Company in India and is listed as the “Most Trusted Brand” in the Category of Entertainment by the “Brand Trust Report, 2013”. PVR, a pioneer in multiplex in India and is the largest cinema exhibition player in the country today. There are about 9,000 screens in India of which multiplexes account for approximately 25 %. The screen density in India is 8 per million as in comparison with 117 per million in US. For multiplexes, it is less than 1 per million. Malls will continue to guide the future of multiplexes. Multiplexes form only tenth space at the mall. The recent KPMG report anticipates the market size of Indian Music & Entertainment sector to touch Rs. 1,45,700 Cr (US$ 25.51 billion) by 2016. The Investments inflows in the movie production space are set to multiply, several movie studios such as Virgin Produced India, Fox Star Studio plans to step up investments in Bollywood. Along with the higher investments and with higher quality content driven by heavy investments would lead to higher demand for movie related entertainment. PVR would be benefited from the increased occupancies and rising Average Ticket Price (ATPs). PVR would be benefited from the increased occupancies and rising Average Ticket Price (ATPs). PVR has offerings across the consumer segments like in Luxury Cinema Viewing it has Directors Cut with ticket prices ranging from Rs. 1,044 to Rs. 1276; in Comfortable Reclining Seats it has Gold Class with ticket prices ranging from Rs. 696 to Rs. 928; in Catering to Upper Middle Class it has PVR Premiere with ticket prices ranging from Rs. 174 to Rs. 348; in Comfortable Regular Seatings it has PVR Mainstream with ticket prices ranging from Rs. 116 to Rs. 174; in Low cost Multi-screen cinemas it has PVR Talkies with ticket prices ranging from Rs. 58 to Rs. 116. Every ticket of Rs. 100 sold is divided as Rs. 20 as entertainment tax, Rs. 36 to distributors and then Rs. 44 for the multiplexs. Multiplexes enjoys margin of around 30 % on Exhibition, margin of around 65 % on food & berverages and margin of around 80 % on advertisement - translating into revenue of around Rs. 68 for exhibition, Rs. 25 for food & berverages and Rs. 7 for advertisment. It is expected that PVR’s Average Ticket Prices can register growth of 7 % at Rs. 177 by the end of FY15E and a growth of 3 % to Rs. 182 by the end of FY16E. Currently, spends per head (SPH) as % of ATP is at 36 % and it can go as high as 4550 %. Moreover, as disposable incomes increase, Foods & Beverages (F&B) spends are also expected to rise to Rs. 60 in FY15E and to Rs. 62 by the end of FY16E, from Rs. 53 currently. In US, this ratio is much higher. In India, the potential is high due to the concept of intervals. Colas and popcorns contribute 65 % of total F&B sales, which also have high margins. PVR is strategizing to augment its advertising revenues by about 25 to 30 % YoY by providing advertisers various deals such as pay per eyeballs and other innovative deals. For multiplexes, in cinema advertising and food sales are bigger businesses. These two businesses have now grown to account for more than a third of the income for multiplex operators. And these segments have grown profitability as they offer bigger margins than its core business of selling movie tickets. Non Ticket segments contributes on an average of 35 % to the revenue of the multiplexes. For PVR revenue from in cinema advertising has been growing in the range of 35-40 % every year in last five to six years. PVR has a deal signed with HUL on ‘Pay for eyeballs’ basis. HUL contributes less than 2 % of overall ad revenues. However, HUL gives confidence to other FMCG advertisers to advertise in multiplexes. PVR has many national advertisers too. Management is maintaining its guidance of 1517 % YoY overall ad growth in FY15. The company has earned about Rs. 141.9 crore in FY14. PVR has about 59.9 million footfalls segregated on various counts, which gives advertisers unmatched opportunity to reach the target audience. It is expected that PVR can see a growth rate of 15 % and 13 % to reach or Rs. 163 and Rs. 184 crore of advertisement revenues by FY15E and FY16E, respectively and thus Advertisement revenue would be PVR’s new noticeable revenue stream. Moreover, a gradual recovery in economic activity will increase disposable incomes to keep growth buoyant. Tepid boxoffice collections impacted performance as many movies fared below expectations. However, this was an aberration. Business is driven by content to a large extent. Bang Bang and Happy New Year did well in PVR’s circuit and met management expectations. Footfalls at malls were high and Movies are still the number one format of entertainment in India. During the weekday/weekend footfalls split ratio is 50:50.  PVR thoroughly checks out the two main parameters of quality of assets and value of opportunity. Also, IRR should be upwards of 15 % for the acquired company. The Company has been trying alternate content at its screens. However, it is still too premature to comment on performance, though early signals are very positive. 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 Rs. 720 Cr, net debt stood at Rs. 660 Cr. Ad inventory of peers is higher than PVR and PVR is planning to add 21 screens in Q4FY15. Over FY15E/FY16E, tax rate will be in single digits. PVR has earmarked capex of INR450500mn for next 3 years (FY1416) to be utilised for renovation and rebranding of Cinemax properties. Company is expected to benefit immensely with implantation of GST. Average entertainment tax is believed to reduce from 23 % currently to 16 % post the implementation of GST. Also, company will be able to avail tax credit of tax paid on input cost if the act is implemented which will reduce its tax liability. PVR has the pricing power with regards to ATP, F&B and advertising and also the company will be a key beneficiary of possible uptick in urban consumption. PVR has earmarked overall capex of Rs. 45 Cr to Rs. 50 Cr spread over next 3 years to be utilised for renovation and rebranding of Cinemax properties. The Management has no plans for equity dilution and signals that PVR is adequately funded for the future growth. A 50-bp drop in the average occupancy ratio erodes could affect the price of the stock by 5 %. At the current market price of Rs. 668.85, the stock P/E ratio is at 51.45 x FY15E and 22.67 x FY16E respectively. PVR can post EPS of Rs. 13.00 and Rs. 29.50 respectively. The content pipeline of the company is exciting and would propel the further growth of PVR. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. 

KEY FINANCIALSFY14FY15EFY16EFY17E
SALES ( Crs)1,347.501,541.201,906.302,236.10
NET PROFIT (₹ Cr)50.4051.40119.50137.80
EPS ()12.9013.0029.5034.00
PE (x)53.1052.5023.1020.10
P/BV (x)7.006.305.004.10
EV/EBITDA (x)16.3014.409.908.10
ROE (%)10.1012.6024.1022.40
ROCE (%)9.7010.9016.2018.50

*As the author of this blog I disclose that I do not hold PVR Ltd in my any of the portfolios.

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Disclaimer
This is a personal blog and presents entirely personal views on stock market. Any statement made in this blog is merely an expression of my personal opinion. These informations are sourced from publicly available data. By using/reading this blog you agree to (i) not to take any investment decision or any other important decisions based on any information, opinion, suggestion, expressions or experience mentioned or presented in this blog (ii) Any investment decisions taken if any would be his/hers sole responsibility. (iii) the author of this blog is not responsible.
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Thursday, July 3, 2014

PVR LIMITED : LEADER IN ITS INDUSTRY !!!

Scrip Code: 532689PVR

CMP:  Rs. 664.45; Buy at current levels & Accumulate at every dips.

Medium to Long term Target – Rs. 730; STOP LOSS – Rs. 611.30; Market Cap: Rs. 2,731.30 Cr; 52 Week High/Low: Rs. 705.00 / Rs. 317.05
Total Shares: 4,11,06,220 shares; Promoters : 1,18,95,970 shares – 28.94 %; Total Public holding : 2,92,10,250 shares – 71.06 %; Book Value: Rs. 156.52; Face Value: Rs. 10.00; EPS: Rs. 14.05; Dividend: 10.00% ; P/E: 47.30 times; Ind P/E: 41.05; EV/EBITDA: 14.72.
Total Debt: 601.44 Cr; Enterprise Value: Rs. 3,299.70 Cr.

PVR LIMITED : PVR Limited was incorporated in 1995 and is based in Gurgaon, India. PVR LTD was incorporated in April 1995 pursuant to a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow Limited, one of the largest exhibition companies in the world. PVR Limited is an India-based company that operates movie houses in India. PVR Ltd came with an IPO on December 08, 2005 with an issue price of Rs. 225 per share and raise about Rs. 173.25 Cr with an objective to utilize the proceeds to finance the then new cinema projects in various cities across the country, to expand the film distribution business, technological up gradation and renovation of cinemas. The Company also generates revenue from in-cinema advertisements and products displays and in-cinema sale of food and beverages. It also produces and co-produces movies; and distributes movies, as well as operates 24 lane bowling centers. PVR, Currently controls 434 screens including 135 screens with Cinemax India Ltd at 92 locations across 37 cities in 13 states and 1 Union Territory. PVR's subsidiaries include CR Retail Malls India Ltd (CRR), Cine Hospitality Private Ltd, PVR Pictures Ltd (PVR Pictures) and PVR bluO Entertainment Ltd (PVR bluO). The Company has diverse cinema circuit in India consisting of 35 Cinemas with 154 screens spread over 20 different cities: Delhi, Faridabad, Gurgaon, Ludhiana, Ghaziabad, Mumbai, Bangalore, Hyderabad, Chennai, Lucknow, Indore, Aurangabad, Baroda, Allahabad, Ahmedabad, Udaipur, Chandigarh, Surat, Latur and Raipur. On January 8, 2013, PVR through its wholly owned subsidiary Cine Hospitality Private Ltd purchased a controlling stake of over 69 %  followed by the open offer for another 26 % in the Cinemax India Limited for Rs. 395 Cr or Rs. 203.65 per sgare from the Rashesh Kanakia and family. PVR Ltd is locally compared with Prime Focus ltd, Reliance Broadcast Network Ltd, Balaji Telefilms ltd, Media Matrix Worldwide Ltd, Shree Ashtavinayak Cine Vision Ltd, Tips Industries Ltd, Fame India Limited, Cinemax Properties Ltd, Era E Zone (India) Ltd, Pyramid Saimira Theatre Limited and Inox Leisure Ltd and globally compared with Walt Disney Co of US California, Time Warner Inc of USA, IG Port Incorporated of Japan, Twenty First Century Fox, Inc of New York, Lions Gate Entertainment Corp of California,  UTV Media PLC of UK, Dreamworks Animation Skg Inc of California, Orange Sky Golden Har. Ente. Holdings Ltd of Hong Kong, Kinepolis Group NV of Belgium, Cinemax X AG of Germany, Digital Cinema Destination Corp of United States and Reading International Inc of United states, Geo Dinos Company Ltd of Japan, Nakanihon Kogyo Company Ltd of Japan.

Investment Rationale:
Priya Village Roadshow (PVR) Cinemas is a leading cinema chains in India. The company began as a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow limited in 1995 with 60:40 ratios. PVR pioneered the multiplex revolution in the country by establishing the first multiplex cinema in 1997 at Saket, New Delhi. This opening of the first multiplex opened up a new era in the Indian cinema viewing experience, which also set a role model for others to follow suit. In 2002, the Village Road Show exited the JV and company changed its name to PVR Limited and in 2003, ICICI Ventures made an investment in PVR and from there on it was no looking back. PVR has set new benchmarks in the cinema exhibition business including establishment of the first largest 11 screen multiplex in the country, Gold Class Cinema, luxury cinema, IMAX theatres and ECX (Enhanced Cinema Experience). PVR, Currently controls 434 including 135 Screens with Cinemax India Ltd at 92 locations across 37 cities in 13 States and 1 Union Territory. It also plans to open another 500 screens by 2015. PVR commands a significant presence in New Delhi and NCR with 55 screens in 16 multiplexes. PVR also has its strong presence in major Indian cities. The Cinemax acquisition makes PVR a leader in the exhibition space and gives a strong bargaining power. PVR has an impressive market share of of around 28 % including Cinemax in the total 1600 multiplex screens in the country. After the Cinemax acquisition, the company has a combined revenue share of 20 % to 22 % in Bollywood and 30 % to 35 % in (Hollywood) of multiplex revenues. The company has about 434 screens as on date and plans to augment its market share by rolling out 60 to 70 screens each year. This leadership position gives PVR the leverage to negotiate better deals with movie producers. It is expected that the total tally at PVR to reach 481 screens with 109 properties in FY15E and 537 screens with 119 properties in FY16E. PVR also plans to approach the next government for a minimum window norm before movie releases are available on other platforms. Management is planning to “re-brand” all the Cinemax screens to PVR which will take 24 months. So far only 2 Cinemax screen is rebranded to PVR and company has seen 25 % increases in revenue. Thus management believes that re-branding is encouraging. As an innovation in marketing strategy, company has tied up with Unilever for marketing on “pay per eye ball” basis. Company is planning to focus on corporate & bulk bookings as a part of new marketing initiative. Currently corporate booking revenue is miniscule at around Rs. 12.5 Cr. However company sees a big potential in this segment. Two marketing employees are allocated at every screen who will market to corporate and colleges in the vicinity of 8 to 10kms. About 8 to 9 % of the all shows were “housefull” shows. The timing of the movies are allotted in such a way that 70 to 75 % occupancy is reached and balance 20 to 25 % are kept as a buffer to handle unexpected increase in demand. The Annual maintenance capex comes at 1-2 % of revenue. Every screen requires refurbishment after 6-8 years to keep the cinema maintained and fresh. This amounts to 20-30 % of original capex. Capex required is on an average of Rs. 2.5 Cr per screen. Of the total 434 screens, 2/3rd screens are older than 2 years. The Company's growth is slow in East and is still not able to find right malls and location for expansion in East. But management continues to look for good opportunity in East. PVR’s occupancy rate for FY14 was around 34 %. PVR is evolving itself into a lifestyle entertainment company and the acquisition of Cinemax proved to be a master stroke which helped PVR to become industry leader. PVR’s has good prospects with improvement in RoCE and RoE with free cash flow visibility and with the timely execution of the given aggressive roll-out plan it will maintain its leadership position.

Outlook and Valuation:
PVR, a pioneer in multiplex in India and is the largest cinema exhibition player in the country today. Post the acquisition of Cinemax, PVR has become India’s largest multiplex chain with 97 properties, 434 screens and 101k seats. PVR is India’s largest and fastest growing multiplex chain with market share of about 23-25 % in Bollywood market and with 33-35 % of market share in Hollywood market. Being the only large player and the way it is expanding itself aggressively will definitely makes PVR an undisputed leader and will further extend its leadership to higher scales. The recent KPMG report anticipates the market size of Indian Music & Entertainment sector to touch Rs 1,45,700 Cr (US$ 25.51 billion) by 2016. There is increased penetration in Indian markets, which is expected to even intensify further, owing to a revolution brought in by digital technology. Wireless broadband, growing internet usage, cable digitisation and higher DTH adoption would further drive Indian M&E industry to new heights. The report also noted that smart phones, tablets, gaming devices have laid the foundation of a new wave in the industry. Also, the Investments inflows in the movie production space are set to multiply, several movie studios such as Virgin Produced India, Fox Star Studio plans to step up investments in Bollywood. Along with the higher investments and with higher quality content driven by heavy investments would lead to higher demand for movie related entertainment. PVR would be benefited from the increased occupancies and rising Average Ticket Price (ATPs). PVR has offerings across the consumer segments like in Luxury Cinema Viewing it has Directors Cut with ticket prices ranging from Rs. 1,044 to Rs. 1276; in Comfortable Reclining Seats it has Gold Class with ticket prices ranging from Rs. 696 to Rs. 928; in Catering to Upper Middle Class it has PVR Premiere with ticket prices ranging from Rs. 174 to Rs. 348; in Comfortable Regular Seatings it has PVR Mainstream with ticket prices ranging from Rs. 116 to Rs. 174; in Low cost Multi-screen cinemas it has PVR Talkies with ticket prices ranging from Rs. 58 to Rs. 116. It is expected that PVR’s Average Ticket Prices to register a growth of 7 % at Rs. 177 by the end of FY15E and a growth of 3 % to Rs. 182 by the end of FY16E. Moreover, as disposable incomes increase, Foods & Beverages (F&B) spends are also expected to rise to Rs. 60 in FY15E and to Rs. 62 by the end of FY16E, from Rs. 53 currently. PVR is strategizing to augment its advertising revenues by about 25 to 30 % YoY by providing advertisers various deals such as pay per eyeballs and other innovative deals. The company has earned about Rs. 141.9 crore in FY14. PVR has about 59.9 million footfalls segregated on various counts, which gives advertisers unmatched opportunity to reach the target audience. It is expected that PVR can see a growth rate of 15 % and 13 % to reach or Rs. 163 and Rs. 184 crore of advertisement revenues by FY15E and FY16E, respectively and thus Advertisement revenue would be PVR’s new noticeable revenue stream. Moreover, a gradual recovery in economic activity will increase disposable incomes to keep growth buoyant. Company is expected to benefit immensely with implantation of GST as the entertainment tax will be offsetted against GST. Average entertainment tax is believed to reduce from 23 % currently to 16 % post the implementation of GST. Also, company will be able to avail tax credit of tax paid on input cost if the act is implemented which will reduce its tax liability. PVR reported sales of Rs. 314 Cr in 4QFY14, compared to Rs. 335 Cr in 4QFY14, marking a YoY growth of 28 %. On result front, PVR poseted a revenue growth in 4QFY14 was primarily due to delivery of low budget films like Queen and 2 States. EBITDA margin for 4QFY14 stood at 10.5 % as against 6.7 % in 4QFY13, primarily due to higher operating leverage. Company reported PAT at Rs. 80 lakhs in 4QFY14, against Rs. 11.7 Cr in 4QFY13, de-growing by 93 %. This was primarily due to higher tax credit of Rs. 29.4 Cr in 4QFY13 as against Rs. 4 Cr in 4FY14. There was an exceptional gain of Rs. 8.5 Cr during the quarter on account of profit from sale of Anupam Multiplex property; common area maintenance, rent expense, property tax relating to earlier year and assets written off during the period. PVR at the end of FY14 has net debt of Rs. 580 Cr, with given strong operating performance and debt repayment over next 2 years, the balance sheet is expected to improve in meaningful way and it is assumed that there would be an debt reduction of Rs. 30 Cr and Rs. 50 Cr in FY15 and FY16 respectively. Going forward, the cash generation would support capex requirement as well as debt repayment. In past, the company has been aggressively expanding its screens presence, and this has resulted in capex in excess of Operating Cash Flow and that lead to an increase in debt. But now, the capex would be lower than the OCF generation and hence would lead to surplus cash to re-pay its debts and this improving balance sheet will command premium multiple. PVR Management has guided to add 60-70 screens in FY15. They target to add 300-450 screens in next 3-4 years. Management has no plans for equity dilution and signals that PVR is adequately funded for the future growth. A 50-bp drop in the average occupancy ratio erodes could affect the price of the stock by 5 %. At the current market price of Rs. 664.45, the stock P/E ratio is at 38.63 x FY15E and 23.81 x FY16E respectively. PVR can post EPS of Rs. 17.20 and Rs. 27.16 respectively. The content pipeline of the company is exciting and would propel the further growth of PVR. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. PVR can touch Rs. 875 in near future. 

KEY FINANCIALSFY13FY14FY15EFY16E
SALES ( Crs)805.001,351.201,640.102,022.50
NET PROFIT (₹ Cr)45.0050.4070.90113.10
EPS ()11.2013.6017.2027.50
PE (x)51.5042.4033.5021.00
P/BV (x)3.606.005.204.30
EV/EBITDA (x)24.2012.109.406.90
ROE (%)6.9010.8016.5022.30
ROCE (%)4.6011.1015.5022.30

I would buy PVR LTD for Medium to Long term for target of Rs. 730.00 and may touch Rs. 875.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 611.30 on every purchase(Why Strict stop loss of 8 % ?) - Click Here

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