PVR Ltd. Media & Entertainment

Transcription

1 PVR Ltd Absolute : LONG Relative : Overweight 2QFY19 Result: Estimate ( ), TP ( ), Rating ( ) Regular Coverage 17% ATR in 17 Months SPI Cinemas to accelerate growth trajectory for PVR maintain LONG Media & Entertainment 2018 Equirus All rights reserved Rating Information Price (Rs) 1,284 Target Price (Rs) 1,594 Target Date Target Set On Implied yrs of growth (DCF) 15 Fair Value (DCF) 1,541 Fair Value (DDM) Ind Benchmark Model Portfolio Position Stock Information 31st Mar'20 25th Oct'18 NA NSEMED NA Market Cap (Rs Mn) 60,015 Free Float (%) % 52 Wk H/L (Rs) / Avg Daily Volume (1yr) 3,70,634 Avg Daily Value (Rs Mn) 495 Equity Cap (Rs Mn) 467 Face Value (Rs) 10 Bloomberg Code PVRL IN Ownership Recent 3M 12M Promoters 20.3 % 0.0 % 0.0 % DII 30.2 % 1.0 % 3.8 % FII 39.5 % -1.5 % -1.9 % Public 10.0 % % -1.9 % Price % 1M 3M 12M Absolute 2.4 % 12.8 % -7.5 % Vs Industry 8.6 % 29.8 % 15.5 % Inox Leisure % -0.3 % % Mukta Arts -9.6 % % % Consolidated Quarterly EPS forecast Rs/Share 1Q 2Q 3Q 4Q EPS (18A) EPS (19E) PVRL s 2QFY19 revenues grew ~28% yoy to ~Rs 7.1bn (+4% vs. EE) driven by box-office (+25% yoy), F&B (+37% yoy) and advertising (+18% yoy) revenues. Overall footfalls at 21.4mn grew ~25% yoy on a 9% growth in comparable footfalls and addition of 2mn footfalls from the acquisition of SPI Cinemas (SPI). EBITDA at Rs 1.24bn was up ~35% yoy (+8% vs. EE) as EBITDAM expanded by ~100bps mainly due to the consolidation of SPI with standalone EBITDAM remaining flattish. PVRL is set to benefit from (a) its unmatched presence in tier-1 cities, (b) expansion in the South and (c) an improved content pipeline. We expect revenue/ebitda/pat CAGR of 21%/28%/38% over FY18-FY21E and broadly maintain our FY19/FY20 estimates. Reiterate LONG with a Mar 20 TP of Rs 1,594 set at a 32x TTM P/E (TP, P/E multiple unchanged). New screen additions, SPI acquisition to keep up growth momentum: PVRL completed the SPI acquisition in mid-aug, with 2QFY19 thus reflecting ~1.5 months of the latter s contribution. Given the higher occupancy ratios of SPI and a strong content pipeline (Thugs of Hindostan, Fantastic Beasts, 2.0, Simba) for the rest of FY19, we expect acceleration in footfall growth. Along with SPI, PVRL has already added 7 properties and 34 screens YTD. Management stated it is on track to achieve 99 screen additions for fullyear FY19 (91 screens for base business, 8 for SPI). F&B revenues solid despite price cuts in some markets: F&B revenues for the base business increased ~25% yoy despite a ~3% yoy decline in SPH as (a) the conversion ratio improved and (b) the GST rate on F&B products came down to 5% from 18% earlier. Contribution margin for F&B declined to ~73.3% in 2QFY19 vs. 73.9% in 2QFY18 mainly due to unavailability of input tax credit and rationalization of F&B pricing. Although advertising revenue growth for the base business slowed down in 1HFY19 (+ yoy), management has guided for >15% growth for full-year FY19 as it plans to get the maximum out of its strong pipeline in the next two quarters. Maintain LONG with a Mar 20 TP of Rs 1,594: Management reassured that SPH would soon be back on the growth track and has guided for SPH growth of ~5% in 2HFY19. Also, it is confident about adding 22 screens in 3QFY19 and 43 in 4QFY19 to achieve full-year guidance of 99 screens. We expect revenue/ebitda/pat CAGR of 21%/28%/38% over FY18-FY21E and broadly maintain our FY19/FY20 estimates. Reiterate LONG with a Mar 20 TP of Rs 1,594 set at a 32x TTM P/E (TP, P/E multiple unchanged). Key risk: Prolonged slowdown in mall development across the country. Change in Estimates Rs. Mn FY19E Chg (%) FY20E Chg (%) Sales 29,840 2% 36,504 3% EBITDA 5,513 4% 6,929 2% EPS % % Consolidated Financials Rs. Mn YE Mar FY18A FY19E FY20E FY21E Sales 23,341 29,840 36,504 41,433 EBITDA 4,018 5,513 6,929 8,412 Depreciation 1,537 1,838 2,194 2,476 Interest Expense 837 1,108 1,306 1,226 Other Income Reported PAT 1,247 1,724 2,408 3,268 Recurring PAT 1,253 1,724 2,408 3,268 Total Equity 10,754 12,478 17,466 20,735 Gross Debt 8,305 12,805 13,305 12,505 Cash ,395 1,584 Rs Per Share FY18A FY19E FY20E FY21E Earnings Book Value Dividends FCFF P/E (x) P/B (x) EV/EBITDA (x) ROE (%) 12 % 15 % 16 % 17 % Core ROIC (%) 9 % 10 % 10 % 12 % EBITDA Margin (%) 17 % 18 % 19 % 20 % Net Margin (%) 5 % 6 % 7 % 8 % October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 1 of 12 Before reading this report, you must refer to the disclaimer on the last page.

2 Quarterly performance, consolidated % Change 2QFY19 2QFY19E 1QFY19 2QFY18 2QFY19E 1QFY19 2QFY18 Net Sales 7,086 6,788 6,963 5,554 4% 2% 28% Comments Movie Exhibition Cost 1,650 1,519 1,663 1,335 9% -1% 24% Consumption of Food and Beverages % 7% 41% Employee Benefits Expense % 4% 31% Other Expenses 2,882 2,811 2,678 2,332 3% 8% 24% Total Operating Expenses 5,845 5,639 5,591 4,638 4% 5% 26% EBITDA 1,240 1,149 1, % - 35% Depreciation % 12% 25% EBIT % -18% 42% Interest % 43% 44% Other Income % 43% 47% PBT % -31% 41% Tax % -25% 51% PAT before MI & Associates % -34% 36% Minority Interest % -1173% -362% Profit from Assoc NA -17% NA Recurring PAT % -37% 28% Extraordinaires NA NA -100% Reported PAT % -37% 31% EPS (Rs) % -37% 28% Gross Margin 69.0% 70.2% 68.8% 69.0% -115 bps 22 bps 0 bps EBITDA Margin 17.5% 16.9% 19.7% 16.5% 57 bps -220 bps 102 bps EBIT Margin 11.2% 10.2% 13.9% 10.1% 100 bps -276 bps 113 bps PBT Margin 7.8% 7.3% 11.6% 7.1% 57 bps -373 bps 76 bps PAT Margin 4.7% 4.6% 7.5% 4.5% 1 bps -283 bps 13 bps Tax Rate 38.1% 34.0% 35.2% 35.6% 412 bps 296 bps 254 bps Key Operational Metrics Footfalls (mn) % 3% 25% Average Ticket Price (Rs) % -5% 1% October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 2 of 12

3 Earnings call takeaways Box-office highlights Top-5 films accounted for ~44% of GBOC for 2QFY19 vs. ~29% for 2QFY18. Sanju, Stree, Gold and Mission Impossible: Fallout were the major hits for 2QFY19. Overall footfalls for the quarter grew ~25% yoy to 23.4mn. Growth was mainly led by ~9% growth in comparable footfalls in the standalone business and addition of ~2mn footfalls from SPI Cinemas. Overall occupancies for 2QFY19 stood at ~34.6%, standalone business occupancy at ~33.4% (+380bps yoy) and SPI occupancy at ~54.7% (weaker than FY18 occupancy of 58%). Average Ticket Price (ATP) for the standalone business grew ~3% yoy to Rs 211 whereas blended ATP came in at Rs 206 due to SPI Cinema s lower ATP of Rs 154. Share of content in 2QFY19: Bollywood 61%, Hollywood 20% and Regional 19%. For 2QFY18, the share of content was as follows: Bollywood 57%, Hollywood 22% and Regional 21%. Footfalls increased only slightly due to issues between an aggregator and a major multiplex player in Sep 18. Overall online admissions have touched % as of now. GBOC contribution would be to the tune of %. F&B updates Standalone SPH for 2QFY19 declined to ~Rs 88 (-3% yoy). However, the company was able to grow F&B revenues by ~25% yoy mainly due to a higher conversion ratio. Net revenue looks higher due to a downward revision in GST rates to 5% from 18% earlier. Other highlights PVRL added 3 properties and 13 screens in 2QFY19. YTD, it has added 7 properties and 34 screens (including 1 property and 4 screens for SPI Cinemas). Management has guided to add a total of 99 screens in FY19 (including 8 screens of SPI Cinemas). The company would add 22 screens in 3QFY19 and 43 in 4QFY19. Acquisition of SPI Cinemas was completed on 17 Aug 18 (71.7% stake). By FY19-end, the company would be able to close the merger process (entire 100% stake). To encourage early booking, PVRL has launched a seat cancellation feature across all cinemas in October for customers booking through PVR web/app and BookMyShow. Cancellation fees vary from 25-50%, depending on the time of ticket cancellation. Bulk of growth in advertising revenues would come in 3Q and 4QFY19. Management has guided for 15-17% growth in advertising revenues for FY19. About 20% of advertising revenues are local in nature whereas rest are corporate. Delhi, Mumbai and Bangalore are the most ad-revenue generating markets. Currently, Local Body Tax is applicable in TN only (more specifically in Chennai, Coimbatore and another city). Recently, Bhopal and Indore municipal councils have announced the levy of LBT. The Multiplex Association of India is in constant engagement with the Government of MP and local officials to withdraw LBT. The contribution of MP in PVRL s overall footfalls is insignificant. Capex for FY19 would be Rs 4.25bn-4.5bn (without SPI). SPI capex would be Rs 200mn-250mn. Post GST, the company has not reported any subsidy; FY19 subsidy should be Rs 100mn-120mn but the company has not been accounting any of this. As of now, the total no of premium screens stands at 62. Standalone contribution margin for F&B declined to ~73.3% in 2QFY19 vs. ~73.9% in 2QFY18 and 75.1% in 1QFY19 mainly due to unavailability of input tax credit in the new regime (effective Nov 17) and rationalization of F&B pricing. Prices were severely (30-40%) cut only in MH, while several F&B promotions were introduced. However, this strategy did not work in non-peak hours. Water has been subsidized across screens. SPH for SPI Cinemas is also in the range of PVRL s standalone business. SPH would grow by ~5% in 2HFY19. October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 3 of 12

4 Exhibit 1:Proportion of F&B and advertising has been increasing in the revenue mix 100% 90% 80% 70% 60% 50% 40% 30% 20% 0% 12% 15% 11% 11% 13% 16% 13% 27% Net Box Office Food & Beverages Advertising/Sponsorship Convenience Income Other Operating Income 27% 26% 27% 27% 27% 57% 55% 53% 55% 56% 56% 53% 55% 56% 54% 26% 28% 11% 30% 12% 27% Exhibit 3: Comparable footfalls grew at a healthy 9% during 2QFY19 20% Overall Footfalls Growth (%) Comparable Footfalls Growth (%) 15% 14% 8% 9% 5% 4% 1% 1% 2% 0% -5% -3% -3% -5% - -7% -6% Q1 Q2 Q3 Q4 Q1 Q2 Exhibit 2:Occupancy for 2QFY19 expanded by ~380bps yoy Exhibit 4:On an average, ATP growth has been in line with inflation Footfalls (mn) Occupancy (%)(RHS) 36.2% 35.9% 35.1% 31.9% 32.0% 31.6% 31.5% 33.4% 29.6% 29.1% % 35% 30% 25% 20% 15% ATP (Rs) Growth (Yoy%)(RHS) 8% 7% 7% 4% 3% -1% 1% 1% % 8% 6% 4% 2% 0% -2% October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 4 of 12

5 Exhibit 5: SPH as a percentage of ATP came down to ~42% in 2QFY19 Exhibit 7: Distributor share would be in the range of 44-45% going ahead F&B SPH (Rs) % of ATP (RHS) % 43.4% 43.3% 40.5% 41.6% 41.2% 41.1% 40.7% 41.6% 41.7% % 45% 40% 35% 30% 25% 20% 15% Distributor Share on NBOC (%) 48% 46.2% 45.8% 46% 45.0% 45.0% 43.3% 43.5% 44% 42.8% 44.4% 44.7% 42% 41.1% 40% 38% 36% 34% 32% 30% Exhibit 6: F&B contribution margin contracted by ~60bps in 2QFY19 Exhibit 8: Trend in advertising and other operating revenues/screen F&B Contrubution Margin Other Operating Revenue per Screen (Rs. mn) Advertising Revenue per Screen (Rs. mn) 79% 77% 75% 73% 71% 69% 67% 65% 76.8% 76.1% 75.8% 76.1% 75.2% 75.1% 73.9% 74.2% 73.8% 73.3% October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 5 of 12

6 Company Snapshot How we differ from Consensus EPS Sales PAT Key Estimates: - Equirus Consensus % Diff Comment FY19E % Consensus numbers may not be updated FY20E % after 2QFY19 results FY19E 29,840 27,859 7 % FY20E 36,504 32, % FY19E 1,724 1,781-3 % FY20E 2,408 2,308 4 % Revenue (Rs mn) FY17 FY18 FY19E FY20E FY21E Box Office 11,249 12,471 15,716 19,288 21,832 Food & Beverages 5,781 6,243 8,598 10,591 12,231 Advertising 2,518 2,969 3,581 4,368 4,992 Other Operating Revenue 1,647 1,658 2,017 2,258 2,378 Operational Metrics FY17 FY18 FY19E FY20E FY21E Footfalls (mn) Occupancy Rate (%) 33% 31% 34% 36% 36% Average Ticket Price (Rs) F&B Spend Per Head (Rs) Ad Revenue/Screen (Rs. mn) (SA) Key Triggers a) Improvement in quality of content to result into higher comparable footfalls b) Favorable judgement on the F&B issue by the Supreme Court of India c) Higher share of in-cinema advertising in the overall advertising pie Key Downside Risks a) Prolonged slowdown in mall development across the country can hamper expansion plans b) Any regulations on ticket/f&b pricing can have adverse effect on revenues c) Rise of OTT platforms could narrow the theatrical release window in the long term DCF Valuations & Assumptions Rf Beta Ke Term. Growth Debt/IC in Term. Yr 8.0 % % 4.0 % 35.0 % - FY19E FY20E FY21-23E FY24-28E FY29-33E Sales Growth 28 % 22 % 14 % 13 % 11 % NOPAT Margin 8 % 9 % 10 % 10 % 11 % IC Turnover RoIC 9.7 % 10.1 % 14.1 % 19.8 % 28.1 % Years of strong growth Valuation as on date (Rs) ,281 Valuation as of Mar' ,110 1,541 Based on DCF, we derive a fair value of Rs 1,281 as on today and Rs 1,541 as on 31 Mar 20. Company Description: PVR Ltd (PVRL), started in 1997, is India s largest multiplex cinema chain. PVR has introduced various movie screening formats across the country to cater to all kinds of customers. PVR currently has 154 theatres and 715 screens spread across 60 Indian cities. To enhance presence in the underpenetrated South Indian market, it recently acquired SPI Cinemas with an existing circuit of 76 screens in 10 cities. Other complementary businesses of the company include movie distribution (PVR Pictures), Gourmet Popcorn Manufacturing (Zea Maize) and movie-on-demand (Vkaao). Comparable valuation Mkt Cap Price EPS P/E BPS P/B RoE Div Yield Company Reco. CMP Rs. Mn. Target Target Date FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E PVR Cinemas LONG 1,284 60,015 1,594 31st Mar' % 15 % 16 % 0.2 % 0.2 % Inox Leisure LONG , st Mar' % 13 % 13 % 0.0 % 0.0 % Mukta Arts NA NA NA % % - October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 6 of 12

7 Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19A 2Q19A 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E Revenue 6,366 5,554 5,573 5,849 6,963 7,086 8,044 7,747 9,378 8,939 9,346 8,841 23,341 29,840 36,504 41,433 Movie Exhibition Cost 1,449 1,335 1,323 1,271 1,663 1,650 1,783 1,671 2,179 2,065 2,089 1,935 5,377 6,767 8,268 9,376 Consumption of Food and Beverages ,591 2,246 2,754 3,160 Employee Benefits Expense ,006 2,541 3,252 3,908 4,395 Other Expenses 2,682 2,332 2,234 2,567 2,678 2,882 3,189 3,312 3,681 3,696 3,591 3,676 9,815 12,061 14,644 16, EBITDA 1, , ,372 1,240 1,614 1,287 1,808 1,566 1,995 1,559 4,018 5,513 6,929 8,412 Depreciation ,537 1,838 2,194 2,476 EBIT , ,260 1,018 1,446 1,011 2,482 3,675 4,735 5,936 Interest ,108 1,306 1,226 Other Income PBT , ,958 2,754 3,648 4,952 Tax ,240 1,684 PAT bef. MI & Assoc ,253 1,786 2,408 3,268 Minority Interest Profit from Assoc Recurring PAT ,253 1,724 2,408 3,268 Extraordinaries Reported PAT ,247 1,724 2,408 3,268 EPS (Rs) Key Drivers Footfalls (mn) Occupancy (%) % 34 % 36 % 36 % Average Ticket Price (Rs) F&B Spend Per Head (Rs) Ad Revenue/Screen (Rs. mn) Sequential Growth (%) Revenue 32 % -13 % 0 % 5 % 19 % 2 % 14 % -4 % 21 % -5 % 5 % -5 % Movie Exhibition Cost 30 % -8 % -1 % -4 % 31 % -1 % 8 % -6 % 30 % -5 % 1 % -7 % EBITDA 145 % -20 % 11 % -7 % 45 % -10 % 30 % -20 % 40 % -13 % 27 % -22 % EBIT 612 % -25 % 13 % -13 % 77 % -18 % 41 % -29 % 59 % -19 % 42 % -30 % Recurring PAT 2,966 % -42 % 12 % -9 % 99 % -37 % 65 % -40 % 99 % -25 % 57 % -37 % EPS 2,966 % -42 % 12 % -9 % 99 % -37 % 65 % -40 % 99 % -25 % 57 % -37 % Yearly Growth (%) Revenue 13 % 2 % 5 % 21 % 9 % 28 % 44 % 32 % 35 % 26 % 16 % 14 % 10 % 28 % 22 % 14 % EBITDA 7 % 14 % 27 % 102 % 20 % 35 % 59 % 36 % 32 % 26 % 24 % 21 % 28 % 37 % 26 % 21 % EBIT 1 % 22 % 38 % 426 % 30 % 42 % 78 % 44 % 30 % 28 % 29 % 28 % 42 % 48 % 29 % 25 % Recurring PAT -2 % -12 % 21 % 1,707 % 17 % 28 % 88 % 25 % 25 % 49 % 43 % 49 % 25 % 38 % 40 % 36 % EPS -2 % -12 % 21 % 1,707 % 17 % 28 % 88 % 25 % 25 % 49 % 43 % 49 % 25 % 38 % 35 % 36 % Margin (%) EBITDA 18 % 16 % 18 % 16 % 20 % 18 % 20 % 17 % 19 % 18 % 21 % 18 % 17 % 18 % 19 % 20 % EBIT 12 % 10 % 11 % 9 % 14 % 11 % 14 % 10 % 13 % 11 % 15 % 11 % 11 % 12 % 13 % 14 % PBT 11 % 7 % 8 % 7 % 12 % 8 % 11 % 7 % 11 % 8 % 13 % 8 % 8 % 9 % 10 % 12 % PAT 7 % 5 % 5 % 4 % 7 % 5 % 7 % 4 % 7 % 6 % 8 % 6 % 5 % 6 % 7 % 8 % * Ad revenue/screen pertains to standalone screens (ex-spi Cinemas) October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 7 of 12

8 Mar/14 Jun/14 Sep/14 Dec/14 Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Sep/17 Dec/17 Mar/18 Jun/18 Sep/18 Dec/18 Mar/19 Jun/19 Sep/19 Dec/19 Mar/20 Mar/14 Jun/14 Sep/14 Dec/14 Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Sep/17 Dec/17 Mar/18 Jun/18 Sep/18 Dec/18 Mar/19 Jun/19 Sep/19 Dec/19 Mar/20 Mar/14 Jun/14 Sep/14 Dec/14 Mar/15 Jun/15 Sep/15 Dec/15 Mar/16 Jun/16 Sep/16 Dec/16 Mar/17 Jun/17 Sep/17 Dec/17 Mar/18 Jun/18 Sep/18 Dec/18 Mar/19 Jun/19 Sep/19 Dec/19 Mar/20 Consolidated Financials PVR Ltd Absolute LONG Relative Overweight 17% ATR in 17 months P&L (Rs Mn) FY18A FY19E FY20E FY21E Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E Revenue 23,341 29,840 36,504 41,433 Equity Capital PBT 1,958 2,754 3,648 4,952 Op. Expenditure 19,323 24,326 29,575 33,020 Reserve 10,286 12,010 16,983 20,251 Depreciation 1,537 1,838 2,194 2,476 EBITDA 4,018 5,513 6,929 8,412 Networth 10,754 12,478 17,466 20,735 Others , Depreciation 1,537 1,838 2,194 2,476 Gross Debt 8,305 12,805 13,305 12,505 Taxes Paid ,240 1,684 EBIT 2,482 3,675 4,735 5,936 Def Tax Liability 106 2,655 1, Change in WC Interest Expense 837 1,108 1,306 1,226 Minority Interest 8 2, Operating C/F 4,463 4,002 4,825 5,731 Other Income Account Payables 2,511 2,914 3,564 4,053 Capex -3,385-10,599-3,679-3,759 PBT 1,958 2,754 3,648 4,952 Other Curr Liabi 1,805 1,805 1,805 1,805 Change in Invest Tax ,240 1,684 Total Liabilities & Equity 23,488 35,221 37,672 39,437 Others PAT bef. MI & Assoc. 1,253 1,786 2,408 3,268 Net Fixed Assets 11,554 17,185 18,670 19,953 Investing C/F -4,054-10,412-3,460-3,517 Minority Interest Capital WIP 1,017 1,017 1,017 1,017 Change in Debt 255 4, Profit from Assoc Others 7,940 13,565 13,565 13,565 Change in Equity Recurring PAT 1,253 1,724 2,408 3,268 Inventory Others ,246-1,508-1,501 Extraordinaires Account Receivables 1,556 1,472 1,800 2,043 Financing C/F , ,026 Reported PAT 1,247 1,724 2,408 3,268 Other Current Assets Net change in cash FDEPS (Rs) Cash ,395 1,584 RoE (%) 12 % 15 % 16 % 17 % DPS (Rs) Total Assets 23,488 35,221 37,672 39,437 RoIC (%) 10 % 10 % 10 % 11 % CEPS (Rs) Non-cash Working Capital -1,677-2,085-2,343-2,539 Core RoIC (%) 9 % 10 % 10 % 12 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 9 % 8 % 8 % 8 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 17 % 18 % 19 % 20 % FA Turnover P/B PATM (%) 5 % 6 % 7 % 8 % Net D/E P/FCFF Tax Rate (%) 36 % 35 % 34 % 34 % Revenue/Capital Employed EV/EBITDA Sales Growth (%) 10 % 28 % 22 % 14 % Capital Employed/Equity EV/Sales FDEPS Growth (%) 25 % 38 % 35 % 36 % Dividend Yield (%) 0.2 % 0.2 % 0.3 % % TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE EPS Growth 120% 100% 80% 60% 40% 20% 0% -20% -40% 70x 60x 50x 40x 30x EBITDA Growth 40% 35% 30% 25% 20% 15% 5% 0% 21x 18x 15x 12x 9x RoE 18% 16% 14% 12% 8% 6% 4% 2% 0% 7x 6x 5x 4x 3x October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 8 of 12

9 Historical Consolidated Financials PVR Ltd Absolute LONG Relative Overweight 17% ATR in 17 months P&L (Rs Mn) FY15A FY16A FY17A FY18A Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A Revenue 14,771 18,496 21,194 23,341 Equity Capital PBT 146 1,569 1,569 1,958 Op. Expenditure 12,763 15,571 18,058 19,323 Reserve 3,677 8,345 9,183 10,286 Depreciation 1,168 1,151 1,384 1,537 EBITDA 2,008 2,924 3,136 4,018 Networth 4,092 8,812 9,650 10,754 Others Depreciation 1,168 1,151 1,384 1,537 Gross Debt 7,470 6,600 8,196 8,305 Taxes Paid EBIT 840 1,773 1,752 2,482 Def Tax Liability Change in WC Interest Expense Minority Interest Operating C/F 1,553 3,543 3,196 4,463 Other Income Account Payables 1,529 1,716 1,976 2,511 Capex -1,691-2,343-6,324-3,385 PBT 146 1,569 1,569 1,958 Other Curr Liabi 720 1,376 1,950 1,805 Change in Invest Tax Total Liabilities & Equity 14,288 18,972 22,257 23,488 Others PAT bef. MI & Assoc , ,253 Net Fixed Assets 7,766 9,139 10,750 11,554 Investing C/F -2,054-2,992-6,321-4,054 Minority Interest Capital WIP ,056 1,017 Change in Debt 1, , Profit from Assoc Others 4,342 4,515 7,647 7,940 Change in Equity 100 3, Recurring PAT 149 1, ,253 Inventory Others Extraordinaires Account Receivables ,021 1,556 Financing C/F 488 2, Reported PAT ,247 Other Current Assets , Net change in cash -14 2,720-2, EPS (Rs) Cash 261 2, RoE (%) 4 % 17 % 11 % 12 % DPS (Rs) Total Assets 14,288 18,972 22,257 23,488 RoIC (%) 8 % 12 % 9 % 10 % CEPS (Rs) Non-cash Working Capital ,212-1,431-1,677 Core RoIC (%) 7 % 10 % 7 % 9 % FCFPS (Rs) Cash Conv Cycle Div Payout (%) 39 % 11 % 12 % 9 % BVPS (Rs) WC Turnover P/E EBITDAM (%) 14 % 16 % 15 % 17 % FA Turnover P/B PATM (%) 1 % 6 % 5 % 5 % Net D/E P/FCFF Tax Rate (%) 6 % 30 % 36 % 36 % Revenue/Capital Employed EV/EBITDA Sales growth (%) 10 % 25 % 15 % 10 % Capital Employed/Equity EV/Sales FDEPS growth (%) -72 % 635 % -9 % 25 % Dividend Yield (%) 0.1 % 0.2 % 0.2 % 0.2 % October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 9 of 12

10 Equirus Securities Research Analysts Sector/Industry Equity Sales Abhishek Shindadkar IT Services Vishad Turakhia Ashutosh Tiwari Auto, Metals & Mining Subham Sinha Bharat Celly Healthcare Viral Desai Depesh Kashyap Mid-Caps Viraj Mehta Dhaval Dama FMCG, Mid-Caps Ruchi Bhadra Manoj Gori Consumer Durables Cash Dealing Room Maulik Patel Oil and Gas Ashish Shah Pranav Mehta Building Materials IleshSavla Praful Bohra Healthcare Manoj Kejriwal Rohan Mandora Banking & Financial Services Dharmesh Mehta Associates Sarit Sanyal Ankit Choudhary Vikram Patil Dhairya Dhruv Gaurav Mehta Harshit Patel Compliance Officer Meet Chande Jay Soni Nishant Bagrecha Corporate Communications Prateeksha Malpani MahdokhtBharda Ronak Soni Quant Analyst Rushabh Shah Kruti Shah Shreepal Doshi F&O Dealing Room Varun Baxi Kunal Dand Vikas Jain Dhananjay Tiwari Rating & Coverage Definitions: Absolute Rating LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies ADD: ATR >= 5% but less than Ke over investment horizon REDUCE: ATR >= negative but <5% over investment horizon SHORT: ATR < negative over investment horizon Relative Rating OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon BENCHMARK: likely to perform in line with the benchmark UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion. Mukesh Jain Mukesh.jain@equirus.com Registered Office: Equirus Securities Private Limited Unit No. 1201, 12th Floor, C Wing, Marathon Futurex, N M Joshi Marg, Lower Parel, Mumbai Tel. No: +91 (0) Fax No: +91- (0) Corporate Office: 3rd floor, House No. 9, Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge, S.G. Highway Ahmedabad Gujarat Tel. No: +91 (0) Fax No: +91 (0) October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 10 of 12

11 2018 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited Analyst Certification I, Harshit Patel/Depesh Kashyap, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. Disclosures Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the Capital Market (Reg. No. INB ), Futures & Options Segment (Reg. No.INF ) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB ) of Bombay Stock Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH ), as a Portfolio Manager under SEBI (Portfolio Managers Regulations, 1993 (Reg. No.INP ) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP ). There are no disciplinary actions taken by any regulatory authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to merchant banking services, private equity, mergers & acquisitions and structured finance. As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. 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The Research Analyst engaged in preparation of this Report:- (a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c) has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company. 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This document has been prepared solely for information purpose and does not constitute a solicitation to any person to buy, sell or subscribe any security. ESPL or its affiliates are not soliciting any action based on this report. The information and opinions contained herein is from publicly available data or based on information obtained in good faith from sources believed to be reliable but ESPL provides no guarantee as to its accuracy or completeness. The information contained herein is as on date of this report, and is subject to change or modification and any such changes could impact our interpretation of relevant information contained herein. While we would endeavour to update the information herein on reasonable basis, ESPL and its affiliates, their directors and employees are under no obligation to update or keep the information current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document including the merits and risks involved. This document is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. ESPL and its group companies, employees, directors and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its research report. Thus, investors should be aware that the firm may have conflict of interest. October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 11 of 12

12 A graph of daily closing prices of securities is available at and (Choose a company from the list on the browser and select the three years period in the price chart). Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest Research Analyst or Relatives financial interest No Research Analyst or Relatives actual/beneficial ownership of 1% or more No Research Analyst or Relatives material conflict of interest No Disclaimer for U.S. Persons Equirus Securities Private Limited (ESPL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition ESPL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by ESPL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., ESPL has entered into a chaperoning agreement with a U.S. registered broker-dealer name called Xtellus Capital Partners, Inc, (''XTELLUS'). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, XTELLUS, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account. October 25, 2018 Analysts: Harshit Patel ( )/Depesh Kashyap, CFA ( ) Page 12 of 12