PVR's Q1FY20 results (Downgrade to Neutral) - Screen addition outlook and QIP key monitorables

Q1FY20 Results Highlights (ex Ind-AS 116)

• Overall cons. performance was ahead of toned down estimates (as content in the qtr was lacklustre barring Avengers: Endgame vs strong pipeline in the base). Cons. rev. at ~Rs8.8bn (+26.4% yoy; 4% beat) was led by strong performance in SPI even as standalone was tepid. Comparable properties footfalls fell by 8% yoy while standalone footfalls grew by just 1.8% yoy. Ex. Ind-AS 116 impacts, cons. EBITDA stood at ~Rs1.6bn (+15.3% yoy; 10% beat on IDFCe, in line with street) with margin of 18% (down 180bp yoy; IDFCe: 17%). PAT (ex Ind-AS 116) stood at ~Rs419m (-20.1% yoy; 27% beat). Reported EBITDA/PAT stood at ~Rs2.8bn/161m. Ind-AS 116 has positively impacted EBITDA by ~Rs1.2bn while at PAT level, there is a ~Rs260m hit.
• Exhibition Segment (standalone): Reported ATP fell 3.7% yoy due to lowering of GST to Rs209, net ATP was up ~6% yoy. Footfalls inched up 1.8% yoy to ~23m led by weak occupancy on poor content (came off to 35.5% vs 35.9% yoy). Strong performance in SPH as it grew by 8.5% yoy to Rs102. (Comparable: Footfalls fell 8%; gross ATP down 1%; SPH up 9%). Std. rev. grew 10.6% yoy to ~Rs7.5bn majorly driven by           ad rev. (+15% yoy) and convenience income (+169% yoy). Net box office revenue grew 5.7% yoy while F&B grew 9.3% yoy (LTL: Box office revenue down 2%; F&B flat; ad revenue up 10% yoy).
• SPI performance: Rev. stood at Rs1.2bn while EBITDA came in at Rs284m (ex. Ind-AS 116; strongest 24.4% margin ever).

Key positives: SPH performance / Ad revenue growth.

Key negatives: Standalone box office performance sluggish.

Impact on financials: Lower ex. Ind-AS 116 EBITDA by 6%/4% for FY20/21E.

Valuations & view

Q1 performance was marginally ahead of our toned down expectations and Q2 & Q3 content slate looks promising. We also continue to like PVRL’s flawless execution in delivering industry leading operating metrics (given its presence in best catchment areas across makets), but, we believe that the recent run up in the stock price captures most of the expected growth in the near-term. The risk to screen addition guidance (not yet factored in our estimates), on account of the massive pressure on real estate developers, however is a concern. In addition, the impending QIP would be a near-term overhang on the stock price. As a result, we downgrade the stock to Neutral while maintaining our 12x FY21E EV/adj. EBITDA (ex. IndAS 116) multiple.