Analysts raise target on PVR post blockbuster Q1; see up to 25% upside

Analysts have raised target on PVR Ltd after the multiplex-chain operator clocked a blockbuster June quarter of FY23 (Q1FY23). They, now, see up to 25 per cent upside in the stock on solid road to recovery.

“PVR outperformed on revenue and Ebitda and turned in highest-ever average ticket price (ATP) and spending per head (SPH). Footfalls continue to revive, driving growth. Continued screen expansion and footfall revival augurs well for growth. This, coupled with a robust pipeline, prompt us to raise EPS by 4.8 per cent and 5 per cent for FY23 and FY24, respectively, which lifts the target price to Rs 2,373,” said Edelweiss Securities.

PVR’s reported revenue was at Rs 981.4 crore, up 83 per cent quarter-on-quarter (QoQ), and 11 per cent higher than pre-Covid levels in Q1FY20. Further, it reported box office revenue of Rs 530.2 crore (up 80 per cent QoQ), and ad revenues of Rs 62.7 crore. The company reported Rs 323.8 crore of F&B revenues, up 90 per cent QoQ, with SPH at Rs 134, up 10 per cent QoQ. The footfalls were up nearly 75 per cent sequentially at 25 million and ATP was 3 per cent higher over Q4FY22 at Rs 250.

Its earnings before interest, tax, depreciation, and amortisation (Ebitda; ex-Ind AS) was at Rs 189 crore with margins of 19.3 per cent — better than pre-Covid levels of 18 per cent — given the strong box office performance. On reported basis, Ebitda was at Rs 341.6 crore with margin of 34.8 per cent. The reported net profit was at Rs 53.4 crore led by strong operating performance.

Here’s how key brokerages interpret the results:

Goldman Sachs | Buy | Target: Rs 2,400

The brokerage has raised FY23-25 revenue and Ebitda estimate by up to 7 per cent and 9 per cent. It also sees Ebitda margin at 24 per cent by December 2022 relative to 20 per cent in December 2019. “Current market price provides attractive entry point,” it said.

CLSA | Buy | Rs 2,410

Lauding the company’s best-ever quarter, the brokerage has upgraded its revenue and Ebitda estimate by 2-16 per cent over FY23-25.

ICICI Direct | Buy | Rs 2,300

The company is likely to have 8-10 per cent permanent saving in costs (ex-rental) given the rationalisation measures. The merged entity (PVR-Inox) will benefit from scale of expansion, faster growth trajectory, and other revenues/cost synergy.

“We bake in 125/100 screens addition in both FY23/FY24, respectively. Consequently, we build in footfalls growth of 3.2 per cent CAGR in FY20-24E to 115 million coupled with 5.5 per cent CAGR in ATP to lead to 9.3 per cent FY20-24E CAGR in net box office revenues to Rs 2,471 crore. F&B revenue CAGR is estimated at 12.4 per cent over FY20-24E leading to a total of Rs 1,513 crore. Ad revenue is expected to recover gradually, and we expect ad revenue of Rs 420 crore in FY24E (12 per cent higher than FY20). We incorporate strong recovery from FY23 with all variables back to pre-Covid levels,” it said.

Edelweiss Securities | Outperform | Rs 2,373

PVR had 843 screens as of March 2021. With its primary focus on the movie exhibition business, PVR will continue to ramp up margin-accretive segments such as F&B revenues and Advertisement revenues, which in our view, will drive the Ebitda expansion for the business. Aggressive expansion and focus on innovation to deliver growth for the business over the longer term.

Emkay Global | Buy | Rs 2,200

We believe that Bollywood content success is necessary to sustain and surpass these collections as the performance of regional movies has been sporadic. The content pipeline looks very strong in the near term, with a few big-budget films lined up for the upcoming quarters. The return of content windowing to 8 weeks from August should also help the multiplex industry.

The brokerage has upgraded revenue estimate for FY23/24/25 by 6.4 per cent/2.5 per cent/2.4 per cent. Ebitda estimates, meanwhile, have been raised by 7.2 per cent/2.3 per cent/1.8 per cent, respectively. Ebitda margin estimate, however, has been revised upwards by 24 bps for FY23 but downwards by 10 bps and 21 bps for FY24 and FY25, respectively.

Kotak Institutional Equities | Buy | Rs 2,200

The merger with INOX offers ~30 per cent upside from current levels led by 15 per cent Ebitda upside driven by merger synergies, and 10 per cent valuation re-rating. We raise PVR’s fair value to Rs 2,200 capturing ~50 per cent of this optionality. Any objection from CCI is a risk to our call. We trim FY2023/24 EBITDA estimates by 5 per cent as we factor in about 50 per cent of the optionality from the merger.