MOSL: PVR (Buy)-Weak southern performance drags earnings
(PVRL IN, Mkt Cap USD1.4b, CMP INR1898, TP INR2250, 18% Upside, Buy)
** PVR's third-quarter earnings were below estimates with revenue/EBITDA (pre-Ind-AS 116) miss of 8%/14%. Although Bollywood/Hollywood movie performance was good, the southern region performance was low contributing ~25%.
** PVR's SSSG has remained weak at 2%, coupled with weak ad revenue growth. However we have maintained estimates on the back of healthy movie pipeline and screen adds.
Revenue/EBITDA miss estimates
** Consol. revenue increased 8.6% YoY (-5.9% QoQ) to INR9.2b (8% miss).
** On a pre-Ind AS 116 basis, EBITDA was up 9.7% YoY at INR1.8b (13.5% miss), with margin expanding 20bp YoY to 19.7% as revenues grew at a faster rate than costs.
** PBT was up 4.1% YoY to INR929m (12.2% miss), while PAT surged by 27.6% YoY (+7.1% QoQ) to INR708m (11% miss).
** Standalone revenue/PAT (excl. SPI) stood at INR8.8b/INR395m (v/s INR8.3b/INR575m in 3QFY19).
** Net box office/F&B/advertisement revenue grew 6.4%/12.6%/8.4% YoY to INR4.5b/2.4b/1.2b at the consolidated level.
** On a consolidated basis, the number of screens increased by 9.8% YoY to 821, while footfalls were flat YoY at 25.9m.
Highlights from the management commentary
** PVR has a pipeline of 30-40 screens for the next two months. It is on track to deliver the guidance of adding 90-100 screens in FY20 on a base of 763 screens in FY19. For FY21, it guided to add 75-100 screens.
** The company is confident about a revival of earnings in the southern region in 4QFY20 as films released during Pongal performed well across regions. Moreover, there is a strong pipeline of films over Feb/March.
** Debt stood at INR8.3b with leverage of 1.1x (net debt to EBITDA); management noted that INR8b-INR9b should be the peak debt level.
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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