PVR Blockbuster quarter

PVR, BUY CMP=Rs:255, Target Price Rs392
Implied Upside 53.9%
Sensex 17,222

Blockbuster quarter

Result: PVR’s Q3FY08 results exceeded our expectations. Revenue for
the quarter grew by 63% YoY to Rs648m. Hike in average ticket prices
(ATP) and seasonally higher contribution from advertisement revenues
led to 613bps YoY increase in operating margins to 20.0%. Consequently,
net profit for the quarter grew by a whopping 268% to Rs61m.

Strong operating metrics: Despite sequential decline in occupancy to
40.5%, PVR reported healthy ticket sale revenue with rise in ATP, which
stood at Rs130, up from Rs124 in the previous quarter. PVR attracted
4.76 million footfalls during the quarter.

Successful foray into movie production: PVR’s first co-production Taare
Zameen Par was released during the quarter. The movie garnered an all
India net box office collection of Rs286m, wherein PVR alone contributed
22% of the total collection.

Attractive valuation: We maintain our positive stance on PVR in the
multiplex space, considering its strong operating performance as
reflected from its ability to charge higher ATPs and attract footfalls
(14.3 million for 9MFY08). Consequently, we have revised our FY08
earnings estimates upwards by 6% to Rs225m. However, delay in property
rollouts continues to be a cause for concern, for which we have revised
downwards our earnings estimates by 7% and 8% for FY09 and FY10
respectively. We value PVR’s exhibition business at Rs317 (13x FY10
earnings, PVR has been traditionally trading in a price band of 13-20x
one year forward), and the film production business at Rs75 per share.
Our revised price target for PVR comes to Rs392. We maintain BUY rating
on the stock.

Source:PL Research, January 24, 2008
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