PVR Ltd (PVRLIM) 1120

Transcription

1 Result Update Rating matrix Rating : B uy Target : 1300 Target Period : 12 months Potential Upside : 16% What s changed? Target Changed from 1010 to 1300 EPS FY17E Changed from 21 to 22.9 EPS FY17E Changed from 27.7 to 30.2 Rating Unchanged Quarterly performance Q1FY17 Q1FY16 YoY (%) Q4FY16 QoQ (%) Revenue EBITDA EBITDA(%) bps bps PAT (26.3) (10.3) Key financials Crore FY15 FY16 FY17E FY18E Net Sales 1,477 1,869 2,196 2,549 EBITDA Net Profit EPS ( ) Valuation summary FY15 FY16 FY17E FY18E P/E Target P/E EV / EBITDA P/BV RoNW (%) RoCE (%) Stock data Particulars Amount Market Capitalization ( Crore) 5,232.6 Total Debt (FY16) ( Crore) Cash (FY16) ( Crore) 24.4 EV 5, week H/L 1143 / 653 Equity capital 46.7 Face value 10.0 Price performance 1M 3M 6M 12M PVR Inox Research Analyst Bhupendra Tiwary bhupendra.tiwary@icicisecurities.com Sneha Agarwal sneha.agarwal@icicisecurities.com Another strong show August 1, 2016 PVR Ltd (PVRLIM) 1120 Net ticketing revenues grew 11.5% YoY to crore aided by a 8.9% increase in the footfalls to 20.7 million (includes one month of DT Cinemas footfall) and 6.6% YoY increase in average ticket prices (ATPs) to 195. Spends per head grew 5% YoY to 78 resulting in 13.7% YoY growth in F&B revenues to crore. Advertisement revenues grew 12.7% YoY to 51.5 crore EBITDA came in at crore vs. our expectation of crore while margins came in at 20.5% (estimated 19.8%). EBITDA came in better than estimates on account of better cost optimisation and high operating leverage. The EBITDA would have been higher but for the higher rental expense emanating from the IND-AS impact. Herein, security deposits paid to developers is discounted to present value while differential amount is recognised on a straight line basis as rent expense during the lease term PAT came in at 42.8 crore, higher than our estimate of 31.6 crore aided by a superior operating performance and lower-than-expected depreciation charge. The quarter had an exceptional charge of 2.6 crore with respect to the write-off of assets on discontinuance of operations at a property and expenses related to DT acquisition Content continues to boost footfalls!!! PVR is a leading multiplex player with a screen count of 551 (including DT Cinemas) as on Q1FY17 and market share of ~25% of total multiplex screens in India, with multiplex revenue share of 17-22% (Bollywood) and 30-35% (Hollywood). After a strong content led growth in FY16, Q1FY17 has been another good quarter for multiplexes, with movies such as Jungle Book, Sairat, Housefull 3, Fan, etc. doing well at the box office. Q2FY17E has also started well with Sultan being declared a blockbuster and the pipeline remains strong with Rustom, Mohenjo Daro, Dishoom, etc. PVR s leadership in the multiplex space enables it to charge premium pricing. It is expected to report ATPs of 198 & 205 in FY17E & FY18E, respectively. The major growth in ATP would stem from DT Cinemas screens, which operate at a superior ATP i.e. at ~15-20% premium to that of PVR. Total footfalls are seen at 80.4 & 91.4 million in FY17E & FY18E, respectively, leading to 18.9% CAGR in net ticketing revenues in FY16-18E to crore. F&B revenues are expected to grow at 20% CAGR over the same period aided by 5.1% CAGR in SPH to Advertisement growth relatively soft given surprise hits, guidance intact Advertisement revenues grew 12.7% YoY to 51.5 crore in Q1FY17. Advertisement revenue growth was a tad softer than usual growth of 18-20% mainly due to surprise hits such as Sairat (regional movie) and Jungle Book (Hindi version) wherein pre-release advertisement deals were lesser. The management, however, maintained its ad growth guidance of 15-17% YoY. We expect the stream to grow at 16% CAGR (FY16-18E) to 278 crore. Continues to lead across metrics, maintain BUY with target price of 1300 PVR, the largest player in the multiplex space, is poised to benefit from its leadership, strong presence across key locations and superior growth levers in metrics such as advertisement & F&B. We continue to remain positive on the Indian multiplex Industry given the demographics, rising income levels and cinema being the cheapest source of out of home entertainment. We continue to maintain BUY recommendation at 14x FY18E EV/EBITDA and arriving at a revised target price of ICICI Securities Ltd Retail Equity Research

2 Variance analysis Q1FY17 Q1FY17E Q1FY16 Q4FY16 YoY (%) QoQ (%) Comments Revenue Net ticketing revenues grew 11.5% YoY to crore aided by a 8.9% increase in the footfalls to 20.7 million ( included one month of DT Cinemas footfall) and 6.6% YoY increase in average ticket prices (ATPs) to 195. Spends per head grew 5% YoY to 78 resulting in 13.7% YoY growth in F&B revenues to crore. Advertisement revenues grew 12.7% YoY to 51.5 crore. Revenues included one month consolidation of DT Cinemas financials Other Income Employee Expenses Film Distributors share F&B Cost Rent Rental expense came in higher owing to the IND-AS impact. Herein, security deposits paid to developers is discounted to present value & differential amount is now recognised on a straight line basis as rent expense during the lease term as per the IND- AS requirement Repairs and Maintenance EBITDA EBITDA Margin (%) bps 920 bps Superior topline and higher F&B margins aided in higher-than-expected margins Depreciation Depreciation was lower than our estimates Interest Less: Exceptional Items The exceptional charge of 2.6 crore was with respect to the write-off of assets on discontinuance of operations at a property and expenses related to DT acquisition Total Tax NA 1,027.1 PAT Given the superior topline and margins, the PAT was higher than estimated Key Metrics Footfalls (mn) Occupancy (%) SPH ( ) ATP ( ) Inclusion of DT Cinemas enabled a higher ATP during the quarter Change in estimates FY17E FY18E ( Crore) Old New % Change Old New % Change Comments Revenue 2, , , , The topline estimates have been tweaked to incorporate Q1FY17 performance EBITDA EBITDA Margin (%) bps bps We now incorporate higher rental cost as per the IND AS accounting resulting in lower margins PAT EPS ( ) PAT estimates have now been revised upwards as we build in lower depreciation & interest cost Assumptions Current Earlier Comments FY15 FY16 FY17E FY18E FY17E FY18E Footfalls (mn) inclusive of DT Ci SPH ( ) ATP ( ) The optical sharp increase in ATP is mainly due to consolidation of DT Cinema (10 months) financials in FY17E ICICI Securities Ltd Retail Equity Research Page 2

3 Company Analysis Factoring in ATP CAGR of 4.8% in FY16-18 to The multiplex industry has witnessed massive consolidation in the sector with PVR acquiring Cinemax and DT Cinemas, Inox acquiring Satyam, Carnival acquiring Big Cinemas, HDIL Entertainment Pvt Ltd and Stargaze Cinemas, Cinepolis acquiring Fun Cinemas, etc. Consequently, the multiplex industry now comprises four major players (Inox, PVR, Carnival and Cinepolis) enabling them to take an average ticket prices (ATP) hike easily. FY16 had been an exceptional year with movies like Avengers, Tanu weds Manu Returns, Bajrangi Bhaijaan, Baahubali, Prem Ratan Dhan Payo, Tamasha, Dilwale, Star Wars, etc. Q1Y17 also turned out to be a strong content driven quarter with movies such as Jungle Book, Sairat, Houseful 3, Fan, Baaghi, etc, which registered strong box office collections. Q2FY17E has also started well with Sultan being declared a blockbuster and the pipeline remains strong with Rustom, Mohenjo Daro, Dishoom, etc. On the back of this, we expect the company to record footfalls of 80.4 million, 91.4 million in FY17E and FY18E, respectively, factoring in revenues from June 2016 onwards for DT Cinemas. The YoY growth in ATP is not comparable as FY16 did not have DT Cinemas. We have factored in ATP, SPH of 198.2, 76.0 and 205.3, 78.2 in FY17E and FY18E, respectively. Exhibit 1: ATP trends ( ) FY14 FY15 FY16 FY17E FY18E PVR to have screen portfolio of 663 screens by FY18E PVR has the first mover advantage in various smaller towns and cities where it has already cornered the best location. The company has always been able to meet its property roll-out guidance. As on Q1FY17, PVR has 551 operational screens (including DT Cinema). PVR has also guided at maintaining the run rate of screens per year for the coming two years. Going ahead, with the mall development activity showing some signs of revival, we expect the company to meet its screen roll-out. We have factored in 13.4% CAGR in FY16-18E to 663 screens by FY18E. PVR continues to command premium in advertisement rates Advertisement revenues grew 12.7% YoY to 51.5 crore in Q1FY17. The advertisement revenue growth was a tad softer than usual growth of 18-20% mainly due to surprise hits such as Sairat (regional movie) and Jungle Book (Hindi version) wherein the pre-release advertisement deals were lower. The management, however, maintained its ad growth ICICI Securities Ltd Retail Equity Research Page 3

4 guidance of 15-17% YoY. We note that PVR commands 30-40% premium in its ad rates owing to its ~70 million footfalls, which provides advertisers with easily reachable audience. We expect the stream to grow at 16% CAGR (FY16-18E) to 278 crore Margins to reach 18.5% in FY18E PVR, being a dominant market player in the multiplex space with an impressive screen market share of about 25%, is in a position to take on price hikes. This ability to take price hikes, higher advertisement revenues and higher operating leverage in the coming future will help in the margin expansion. Furthermore, DT Cinemas, which operates at a strong margin profile of 24%, will aid the margins in FY18E. Now, we also incorporate higher rental cost emanating from the IND-AS impact. Herein, security deposits paid to developers is discounted to present value & differential amount is recognised on straight line basis as rent expense during the lease term now, resulting in higher rental expenses. Margins are expected to reach 17.9% and 18.5% in FY17E and FY18E, respectively. Exhibit 2: EBITDA & PAT margin trend (%) FY14 FY15E FY16E FY17E FY18E EBITDA% NPM% ICICI Securities Ltd Retail Equity Research Page 4

5 Valuation PVR, the largest player in the multiplex space, is poised to benefit from its leadership, strong presence across key locations and superior growth levers in metrics such as advertisement & F&B. We continue to remain positive on the Indian multiplex industry given the demographics, rising income levels and cinema being the cheapest source of out of home entertainment. We continue to maintain BUY recommendation at 14x FY18E EV/EBITDA and arrive at a revised target price of Exhibit 3: Valuations Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE ( cr) (%) ( ) (%) (x) (x) (%) ( %) FY FY FY17E FY18E ICICI Securities Ltd Retail Equity Research Page 5

6 Company snapshot 1, ,100 1, ( ) (%) Jul-14 Sep-14 Dec-14 Mar-15 May-15 Jul-15 Oct-15 Dec-15 Mar-16 May Aug-16 Price Idirect target Consensus Target Mean % Consensus with BUY Source: Bloomberg, Company, ICICIdirect.com Research Key events Date Mar-09 Apr-09 Jun-09 Nov-09 Jan-10 Jan-11 Jun-12 Aug-12 Oct-12 Mar-13 Sep-13 Nov-14 Jun-15 Event PVR bluo opens its first and India's largest 24 lane Bowling Centre with the brand name of 'blu-o' located at prestigious Ambience Mall in Gurgaon PVR merged with Sunrise Infotainment Pvt. Ltd (the transferor company) a 100% subsidiary of the Company with PVR Ltd (the transferee Company). Tiff between movie producers and exhibitors impacts financials of the business and, hence, stock price PVR Cinemas acquires Dt Cinemas for cash cum stock deal, cash component of crore and allot 2.55 million shares representing 9.1% of PVR's share capital PVR merges with Leisure World Pvt Ltd (LWPL) Imax, PVR sign a four theatre deal in India Multiplexes no longer impacted by IPLs. They exhibit better occupancy even during the IPL season PVR sells L Capital Eco equity stake of 10.6% based on its aggressive expansion plans Shift in strategy from production to only distribution owing to heavy losses in the production business Acquires Cinemax for a consideration of about 203 per share Enters into a sale and lease back agreement for Anupam Cinemas, Delhi Receives board of director's approval for NCD issue of 500 crore PVR announces acquisition of DT Cinemas owned by DLF and operating 29 screens for a consideration of about 500 crore Top 10 Shareholders Rank Name Latest Filing Date % O/S Position (m)n Change ( m) 1 Bijli Holdings Pvt. Ltd. 31-Mar Reliance Nippon Lif e Asset Management Limited 31-Mar Baron Capital Management, Inc. 31-Mar Plenty Private Equity Fund I Ltd. 31-Mar Sundaram Asset Management Company Limited 31-Mar Bijli (Ajjay) 29-Jun BNP Paribas Investment Partners Asia Ltd. 31-Mar Kotak Mahindra Asset Management Company Ltd. 31-Mar Kotak Mahindra (UK) Ltd 31-Mar Axis Asset Management Company Limited 31-Mar Source: Reuters, ICICIdirect.com Research Shareholding Pattern (in %) Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Promoter FII DII Others Recent Activity Buys Sells Investor name Value Shares Investor name Value Shares Kotak Mahindra (UK) Ltd +5.87M +0.53M Plenty Private Equity Fund I Ltd M -2.73M Indus Capital Partners, LLC +5.28M +0.48M Reliance Nippon Life Asset Management Limited M -1.64M Artisan Partners Limited Partnership +1.79M +0.16M BNP Paribas Investment Partners Asia Ltd M -1.23M Bijli (Selena) +1.66M +0.15M Norges Bank Investment Management (NBIM) -9.64M -0.80M Mirae Asset Global Investments (Hong Kong) Limited +1.37M +0.12M Bijli (Aamer Krishan) -1.15M -0.09M Source: Reuters, ICICIdirect.com Research ICICI Securities Ltd Retail Equity Research Page 6

7 Financial summary Profit and loss statement Crore (Year-end March) FY15 FY16E FY17E FY18E Total operating Income 1, , , ,549.1 Growth (%) Film Distributors Cost F&B Cost Employee Expenses Other Expenses ,024.8 Total Operating Expenditure 1, , , ,078.8 EBITDA Growth (%) Depreciation Interest Other Income Exceptional Items PBT MI/PAT from associates Total Tax PAT Growth (%) EPS ( ) Cash flow statement Crore (Year-end March) FY15 FY16E FY17E FY18E PAT Add: Depreciation Add: Interest Paid (Inc)/dec in Current Assets Inc/(dec) in CL and P rovisions Ot hers CF from operating activities (Inc)/dec in Investments (Inc)/dec in Fixed Assets Others CF from investing activities (149.9) (535.1) (372.9) (223.8) Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend paid & dividend tax Less: Interest Paid Others CF from financing activities (198.6) Net Cash flow Opening Cash Closing Cash Balance sheet Crore (Year-end March) FY15 FY16E FY17E FY18E Liabilities Equity Capital Reserve and Surplus ,058.1 Total Shareholders funds ,104.8 Total Debt Ot hers Total Liabilities 1, , , ,785.4 Assets Total Fixed Assets , , ,528.9 Inv es tme nt s Debtors Inventory Loans and Advances Other Current Assets Cash Total Current Assets Total Current Liabilities Net Current Assets Other Non Current Assets Application of Funds 1, , , ,785.4 Key ratios (Year-end March) FY15 FY16E FY17E FY18E Per share data ( ) EPS (Diluted) Cash EPS BV DP S Cash Per Share Operating Ratios (%) EBITDA Margin EBIT / Net Sales PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Net Debt / Equity Current Ratio Quick Ratio ICICI Securities Ltd Retail Equity Research Page 7

8 ICICIdirect.com coverage universe (Media) CMP M Cap EPS ( ) P/E (x) EV/EBITDA (x) RoCE (%) RoE (%) Sector / Company ( ) TP( ) Rating ( Cr) FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E FY16E FY17E FY18E DB Corp (DBCORP) Buy 7, DISH TV (DISHTV) Hold 11, ENIL (ENTNET) Buy 3, Eros (EROINT) Hold 2, Hathway Cables (HATCAB) Sell 2, NM NM NM NM NM NM HT Media (HTMED) Hold 1, Inox Leisure (INOX) Buy 2, Jagran Prakashan Buy 5, PVR (PVRLIM) 1,120 1,300 Buy 5, Sun TV (SUNTV) Hold 18, TV Today (TVTNET) Buy 1, ZEE Ent. (ZEETEL) Buy 48, ICICI Securities Ltd Retail Equity Research Page 8

9 RATING RATIONALE ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more; Pankaj Pandey Head Research pankaj.pandey@icicisecurities.com ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai research@icicidirect.com ICICI Securities Ltd Retail Equity Research Page 9

10 ANALYST CERTIFICATION We /I, Bhupendra Tiwary MBA, Sneha Agarwal, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Terms & conditions and other disclosures: ICICI Securities Limited is a Sebi registered Research Analyst having registration no. INH ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking and is, inter alia, engaged in the business of stock brokering and distribution of financial products. 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