PVR
Truly entertaining
Good expansion plans and entry in to many new related businesses will sustain high growth
| Buy | PVR |
| BSE Code | 532689 |
| NSE Code | PVR |
| Bloomberg | PVRL@IN |
| Reuter | PVRL.BO |
| 52-week High/Low | Rs 377 / 148 |
| Current Price | Rs 247 (as on 15th February 2008) |
PVR was incorporated in 1995 pursuant to a JV with Village Roadshows, one of the largest cinema exhibition companies in the world. It opened the first multiplex in India in Delhi in 1997. In November 2002, Village Roadshows divested its stake in PVR as part of an overall strategy to rationalize its operations across 18 countries. Since then, PVR has come a long way and is presently the largest multiplex player in India with 77 screens across 21 properties. PVR is also present in the movie distribution business through its 100% subsidiary PVR Pictures.
A pioneer of the multiplex culture in India, PVR currently has a significant marketshare in the northern region. The company is an established film distributor and has also ventured into film production. Going ahead, PVR plans to have a pan-India presence in film exhibition.
Good show
For the quarter ended December 2007, the company registered sales growth of 63% to Rs 64.81 crore. OPM expanded by 610 basis points to 20.0%. This took OP up by 135% to Rs 12.97 crore.
PBT was up 283% to Rs 9.22 crore and PAT soared 268% to Rs 6.11.
Revenue from Ticket sales for the quarter ended December 2007 were Rs 43.87 crore (up 52%) and Income from revenue sharing for the quarter ended December 2007 were Rs 7.56 crore (up 66%). Overall revenue from ticket sales and income from revenue sharing for the quarter ended December 2007 were higher by 54%.
Revenue from Food & Beverage sales for the quarter ended December 2007 were Rs 13.63 crore (up 53%). This was achieved through a robust increase in average spend per patron (up by 14% ) and increase in admits at existing cinemas and new cinemas opened by the company.
Revenues from Advertising & Promotions for the quarter ended December 2007 saw a phenomenal growth on account of growth in corporate alliances and increase in sponsorship revenues from existing as well as new cinema properties. The revenues for the quarter were Rs 10.05 crore (up 107%). Royalty income for the quarter ended December 2007 was Rs 37 lacs (down 13%). Revenues from Management fee for the quarter ended December 2007 were Rs 21 lacs (up 4%). Revenues from Convenience fee for the quarter ended December 2007 were Rs 61 Lacs (up 220%) on account of increase in tickets sales from website and allied channels like IVR, Mobile Ticketing etc.
For the nine month ended December 2007, the company registered sales growth of 47% to Rs 181.27 crore. OPM expanded by 540 basis points to 20.7%. This took OP up by 98% to Rs 37.56 crore.
PBT was up 136% to Rs 27.77 crore and PAT soared 120% to Rs 18.36.
The top 5 movies during the quarter were Om Shanti Om, Jab We Met, Bhool Bhulaiyya, Taare Zameen Par and Welcome. Based on the All India net box office estimates for the top 5 movies released during this quarter (Data obtained from Ibosnetwork.
Across its cinema circuit, 4.76 million patrons visited its cinemas during the quarter ended December 2007 and 14.30 million patrons visited its cinemas during nine months ended December 2007.
Rising OPM set to improve further
During the quarter ended December 2007 OPM jumped to 20% from the 13.4% on account of high occupancy rates, higher ATPs, lower entertainment tax and economies of scale showing through the business model. This is expected to further rise due to operating leverage and contribution from the more profitable movie production business.
Multiplex industry on strong growth path
The multiplex industry is set to witness strong volume growth in the years to come. Rising income levels, increasing consumerism, advent of organized retail and overall multiplex under-penetration in India are expected to drive volumes for the industry. However, industry profitability is contingent on variables like timely mall development, regulatory outlook (entertainment taxes, service tax), steady availability of quality content and the growing bargaining power of content providers (movie production houses). Given this, the first movers, good executors, strong brands and evolving integrated players like PVR are likely to be better placed in a competitive marketplace
Enjoys a first mover advantage and a dominant position
PVR is one of India’s leading and premium Multiplex Cinema operator. It pioneered the concept of multiplexes in India by establishing India’s first Multiplex Cinema, PVR Anupam, in Saket, Delhi in 1997 and the largest Multiplex Cinema in India, PVR Bangalore in 2004. As of December, 2007, its geographically diverse cinema circuit in India consisted of 24 cinemas with a total of 95 screens spread over Delhi, Gurgaon, Faridabad, Ghaziabad, Noida, Mumbai, Bangalore, Hyderabad, Indore, Lucknow, Ludhiana, Aurangabad, Latur & Baroda.
It dominates the screen count in India's multiplex industry along with Adlabs. PVR's screens pan 24 properties and have a cumulative capacity of more than 24,000 seats. PVR is also the only player to have crossed the mark of serving 14mn patrons in a year, a milestone it achieved in FY07 when it clocked 14.73mn patrons. PVR vitally, also has a dominant share at the box office with an 11-13% share of All India box office collections of leading releases.
PVR initially focused on the North Indian geography and is the dominant multiplex operator in the region; Delhi and NCR in particular. According to available data PVR accounts for almost two-third of the properties in the region. While most of the screens that PVR has are leased, two properties (Spice World, Noida and SRS, Faridabad) are run on the franchisee model.
Expansion plans to foray into new markets
PVR has aggressive expansion plans and intends to scale up its operations to 248 screens by FY10E from the current 95 screens. Besides strengthening its dominance in North India, PVR has lined up aggressive expansion plans in the South and West of India as well.
This includes PVR's plans to set up a 7-screen multiplex in Mumbai (Phoenix Mills) with a capacity of 2,050 seats. This property is a part of PVR's wholly owned subsidiary - CR Retail. This is currently the only owned property with PVR. The management expects the Phoenix mill property to come on stream in early CY08, after a prolonged delay on account of property hand-over etc. Profitability from this property would be higher than other properties as it is an owned property.
PVR has inked a tie-up between PVR and Prestige Group, whereby PVR shall partner with Prestige as an anchor tenant for its next 5 mall developments in South India. Through this tie-up, PVR is looking to expand its presence across the cities of Bangalore (Whitefield and Shantiniketan)
About 40-50 new properties will be commissioned in FY 2009
Entry into low cost multi-screen cinemas augurs well
PVR proposes to operate low-cost multi-screen cinemas that would offer superior ambience and high hygiene standards; branded as ‘PVR Talkies’. The target segments for PVR Talkies would be smaller towns and Tier II and III cities.
It plans to provide varied options in food and other entertainment at these cinemas. Ticket pricing would however, be at a steep discount to multiplexes but at a premium to traditional single screen cinemas. As against an ATP of Rs130-150 in the larger cities, tickets at PVR Talkies will be priced at Rs60-65. Being a ‘no frills’ offering, PVR Talkies is expected to have lower overheads and lower capex requirement. PVR has three such projects running currently at Latur, Baroda and Aurangabad.
Recently the company has announced the launch of premium brand of multiplex called "PVR Premiere" and intends to open 30-40 screens such PVR Premiere across metros and cosmopolitan towns in India by 2010E. PVR Premiere is positioned as the flagship brand of PVR and is restricted to key markets and premium locations within such key markets.
PVR plans to be a comprehensive brand in the exhibition industry with 'PVR Cinemas' for urban & semi urban cities; 'PVR Talkies' for consumers in tier II and III cities and 'PVR Premiere' for its upper end urban consumers.
Diversifying into production and distribution forays
Over the recent quarters PVR has been looking at de-risking its business model by backward integrating in the movie value chain. This would augur well for the company as integrated movie exhibition houses are better placed than standalone multiplexes in the longer term.
In the distribution business, in the past PVR has distributed Bollywood movies like Omkara, Don, Honeymoon Travels, etc in the North Indian territory. The company has successfully distributed in India some big Hollywood films like ‘The Aviator’, ‘Chicago’ and ‘Finding Neverland’. PVR has also been appointed as a co-distributor for Paramount Films in the Delhi and Gurgaon region.
In terms of financial investments PVR has invested more than Rs.20mn in the distribution venture; in business PVR signs distribution agreements on commission and revenue sharing basis.
PVR's entry into film production through its wholly owned sub- PVR Pictures strengthens its bargaining power as content providers will continue to call shots across the value chain. Under its initial foray into the movie production business, PVR has signed a 2-film mega deal worth Rs 30 crore with Bollywood actor Aamir Khan. Under the said agreement, PVR would have the Home video, satellite, exhibition and TV rights for these two movies for 15 years.
The entry into this business will also provide PVR with other revenue streams from content distribution avenues like IPTV, DTH and mobile, going forward. PVR's first film project- ‘Taare Zameen Par’ that is one of the two projects being coproduced with Aamir Khan has done exceedingly well at the box office. Trade papers indicate it to be one of the top grousers in 2007 with a gross BO collection of more than Rs 75 crore (domestically) in weeks after release. PVR was the co-producer with invested capital close to Rs 12 crore -14 crore.
The second film is expected to be released in February 2008 according to trade papers.
Apart from "Taare Zameen Par", some of the recent movies distributed by PVR include "Bal Ganesh", "Lions of Punjab", "Breach", "Hannibal Rising", "Don", "Omkara", "Honeymoon Travels" and "Bheja Fry".
According to the management, PVR Pictures has signed up four more projects for co-production; two of which are with Raj Kumar Santoshi. These projects are expected to release in FY09.
JV with Major Cineplex group
PVR has announced the formation of a JV with Major Cineplex group of Thailand to bring lifestyle entertainment concepts to Indian consumers. PVR is expected to hold 51% stake in the JV.
Major Cineplex Group Public Co Ltd is the largest operator of movie theaters in Thailand. Combined with its subsidiary, EGV Entertainment, the company has 258 screens in 32 locations. It is also a major player in lifestyle entertainment, where it has experience and expertise. These facilities are built around its multiplex properties.
The JV will set up entertainment facilities like bowling alleys, gaming zones, karaoke centers and skating rinks. The company, though, has not yet firmed up its capital commitments towards the JV.
This is a right step towards broadening its presence across the retail value chain and build further on the high 20 mn footfalls PVR' exhibition business generates. Good execution can help increase consumer spends (read better profitability) on the property. The lifestyle entertainment business is largely disaggregated and an operator with a bouquet of offerings (movies, F&B, entertainment) can command higher spends.
Sustainable high growth will help it command rich valuations
We expect the company to register sales and net profit of Rs 238.80 crore and Rs 22.88 crore in FY 2008. On equity of Rs 23.01 crore and face value of Rs 10 per share, EPS works out to Rs 9.9. This is expected to rise to Rs 14.7 in FY 2009. The share price trades at Rs 247. While the P/E on FY 2007 EPS is 24.9, it falls to 16.8 on FY 2009 EPS.
| | 0503 (12) | 0603 (12) | 0703 (12) | 0803 (12P) | 0903 (12P) |
| Sales | 68.64 | 103.02 | 164.72 | 238.80 | 334.31 |
| OPM (%) | 16.2 | 15.8 | 15.8 | 20.5 | 21.0 |
| OP | 11.15 | 16.3 | 26.02 | 49.07 | 70.21 |
| Other inc. | 2.03 | 3 | 7.15 | 8.23 | 9.46 |
| PBIDT | 13.18 | 19.3 | 33.17 | 57.29 | 79.67 |
| Interest | 2.39 | 3.23 | 5.5 | 7.20 | 9.36 |
| PBDT | 10.79 | 16.07 | 27.67 | 50.09 | 70.31 |
| Dep. | 5.52 | 7.07 | 12.42 | 15.68 | 19.60 |
| PBT | 5.27 | 9 | 15.25 | 34.41 | 50.71 |
| Tax | 1.62 | 3.53 | 4.69 | 11.53 | 16.99 |
| PAT | 3.65 | 5.47 | 10.56 | 22.88 | 33.72 |
| EPS* (Rs) | 1.6 | 2.4 | 4.6 | 9.9 | 14.7 |
| EPS is calculated current equity of Rs 23.01 crore; | |||||
| PVR: Results |
| | 0712(3) | 0612(3) | Var. (%) | 0712(9) | 0612(9) | Var. (%) | 0703 (12) | 0603 (12) | Var. (%) |
| Sales | 64.81 | 39.71 | 63 | 181.27 | 123.63 | 47 | 164.72 | 103.02 | 60 |
| OPM (%) | 20.0 | 13.9 | | 20.7 | 15.3 | | 15.8 | 15.8 | |
| OP | 12.97 | 5.51 | 135 | 37.56 | 18.97 | 98 | 26.02 | 16.3 | 60 |
| Other inc. | 2.57 | 1.85 | 39 | 6.64 | 5.77 | 15 | 7.15 | 3 | 138 |
| PBIDT | 15.54 | 7.36 | 111 | 44.2 | 24.74 | 79 | 33.17 | 19.3 | 72 |
| Interest | 2.13 | 1.44 | 48 | 5.05 | 4.04 | 25 | 5.5 | 3.23 | 70 |
| PBDT | 13.41 | 5.92 | 127 | 39.15 | 20.7 | 89 | 27.67 | 16.07 | 72 |
| Dep. | 4.19 | 3.51 | 19 | 11.38 | 8.93 | 27 | 12.42 | 7.07 | 76 |
| PBT | 9.22 | 2.41 | 283 | 27.77 | 11.77 | 136 | 15.25 | 9 | 69 |
| Tax | 3.11 | 0.75 | 315 | 9.41 | 3.43 | 174 | 4.69 | 3.53 | 33 |
| PAT | 6.11 | 1.66 | 268 | 18.36 | 8.34 | 120 | 10.56 | 5.47 | 93 |
| EPS* (Rs) | # | # | | # | # | | 4.6 | 2.4 | |
| EPS is calculated current equity of Rs 23.01 crore; | |||||||||
BigGains !!
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