MOSL: PVR (Buy)-Steady screen adds to drive healthy growth
PVR: Steady screen adds to drive healthy growth
(PVRL IN, Mkt Cap USD1.2b, CMP INR1785, TP INR2050, 15% Upside, Buy)
- EBITDA up 16% YoY; PAT down 20% YoY (in-line): On a pre-Ind-AS 116 basis, consol. revenue grew strongly by 26% YoY, driven by healthy screen adds. EBITDA increased 16% YoY to INR1.6b (in-line). PAT declined 20% YoY (in-line), led by a significant increase in depreciation and interest cost, partly due to the SPI acquisition. On an Ind-AS 116 basis, PAT was down by a steep 69% YoY, unlike peers which faced limited impact, as the company has longer 15-year leases with higher liability and interest charge.
- Concall highlights: (1) Net debt stood at INR13b. Capex guidance at INR5b for FY20 with 80+ screen adds. Currently, 100+ screens are in fit-out stage; expects to reach 1,000 screens over the next two years. (2) PVR expects to deliver a better performance in 2Q/3QFY20, supported by a strong pipeline of movie releases.
- Continued screen adds bolster growth prospects: We expect healthy 13% consol. revenue CAGR over FY19-21 (largely maintained), driven largely by screen adds. This, coupled with operating leverage benefits and synergies from SPI Cinemas, is likely to drive consol. EBITDA CAGR of 21% on a pre-Ind-AS 116 basis (adj. INR4.8b rent expenses). We cut our estimates sharply, as the increase in non-cash interest/depreciation cost due to Ind-AS 116 has shaved off ~3% net margin to 2.5% at the PAT level.
- Valuation and view: Healthy growth prospects, coupled with strong competitive position, favor premium valuations. We have adjusted our EV/EBITDA multiple due to the EBITDA reclassification. Subsequently, we ascribe 10x EV/EBITDA (at five-year average multiple) to FY21E EBITDA of INR7.8b, arriving at a TP of INR2,050 (15% upside). Maintain Buy.
PVR Limited is an India-based holding company. The Company is a film entertainment company, which is engaged in the motion picture exhibition in cinemas. The Company has organized its operations into three business segments: Movie exhibition, Movie Production & Distribution, and Others. Its Others segment includes bowling, gaming and restaurant. The Company is also engaged in in-cinema advertisements/product displays and sale of food and beverages at cinema locations. The Company offers technologies, including 4DX Technology, which stimulates the senses with effects, such as seat motion, wind, rain, fog, lights and scents to match the audio and video in both two-dimensional (2D) and three-dimensional (3D); IMAX, which provides a viewing technology with optimized sound and projection system, and Playhouse, which is designed for kids. The Company operates a network of approximately 550 screens spread over 120 properties in approximately 50 cities across the country.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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