A very encouraging report on PVR 
http://www.motilaloswal.com/Financial-Services/Research/Detailed-Report/Initiating-Coverage/6989
PVR is well & truly on an expansion spree.They have opened a 7 screen mall in Pune today,taking the consolidated no. screens to 390.
Q2 should be excellent as well.
Excellent numbers from PVR today.
Sales 236cr. vs 176cr.
Net Profit 28cr. vs 15cr.
TTM EPS almost 25 now.
Great going.
Highlights of the call by Capital Mkt:
The mgmt said that it is not seeing any slowdown in spending in entertainment industry. Q2 box office collection was low due to poor content. Q3 is expected to better on YoY basis on back of some good content.
For the quarter, the company has reported 90% growth in consolidated net operating revenues at Rs 367.08 crore. EBIDTA margin has inclined by 130 bps to 20.7%. The net profit stood at Rs 27.66 crore, up by 71%.
PVR had income of Rs 237.94 crore, growth of 32% with EBIDTA margin of 19.1% decline by 10 bps. The net profit was up by 46% to Rs 21.83 crore.
Cinemax had income of Rs 111.77 crore, de-growth of 5% with EBIDTA margin of 24.5%, decline of 130 bps. There was one time income of Rs 0.9 crore. The net profit was down by 17% to Rs 13.08 crore. There was EO expenses of Rs 2.29 crore which are written off of some discontinued projects and provision for pending items under litigation. The mgmt said that it will be done with provision by 31stMarch 2014. The convenience income was impacted due to Notification by Maharashtra Govt. prohibiting the charge of convenience fee on online ticketing. The company charge around Rs 15 â 20 convenience charges. 17% - 18% is online booking in Mumbai.
The consolidated net box office collection was up by 13% to Rs 222.36 crore, PVR net box collection was up by 29% to Rs 150.48 crore while cinema was down by 10% to Rs 71.88 crore.
Cinemax box office collection was low due to pricing of lower ticket for Marathi film as Maharashtra Government has waived off 40% entertainment tax on it. Cinemax have lot of screens in Maharashtra. Added to it is, Cinemax is also following weekend â weekday pricing strategy like PVR, which also resulted in Cinemax’s lower ticket pricing. However, ticket pricing is expected to move up in coming days.
Revenue of Cinemax was also impacted due to shutdown of one Multiplex in Panipat and close down of one in Pune due to some accident.
For the quarter, PVR footfalls decreased by 9% at 79 lakhs in comparable properties, with total footfalls of 109 lakhs, which is up by 20%. Cinemax’s footfall decreased by 5% to 56 lakhs for comparable properties with total footfalls of 57 lakhs, which is down by 9%. Overall, total footfalls decreased by 7% to 135 lakhs for comparable properties and including non-comparable properties, it is up 8% to 166 lakhs. Q2 FY14 content was muted - Only 2 Big films (Chennai Express & Bhaag Milkha Bhaag) as compared to 5 Big films (Ek Tha Tiger, Barfi, Bol Bachan, Dark Knight & Amazing Spiderman) in Q2 FY13 which resulted in fall in footfalls. Last year Q2 FY 13 was the best quarter with strong film slate, this year content pipeline shifted to Q3 FY 14 with big movies like Boss, Krishh 3, Ram Leela, Singh Saheb the Great, Bullet Raja, Dhoom 3.
For the quarter, PVR Average Ticket Price (ATP) increased by 5% at Rs 178 in comparable properties and including non-comparable properties total ATP was up by 6% to Rs 177. Cinemax’s ATP decreased by 1% to Rs 155 for comparable properties and including non-comparable properties total ATP was down by 1% to Rs 155. Overall, total ATP increased by 3% to Rs 168 for comparable properties and including non-comparable properties it us up by 4% to Rs 169.
The consolidated net F&B revenue was up by 25% to Rs 79.45 crore, PVR net F&B revenue was up by 48% to Rs 54.5 crore while cinemax was down by 6% to Rs 24.95 crore.
For the quarter, PVR spend per head on F&B increased by 17% at Rs 55 in comparable properties and including non-comparable properties it was at Rs 55, which is up by 17%. Cinemax’s spend per head on F&B increased by 5% to Rs 47 for comparable properties and including non-comparable properties it was at Rs 47, which is up by 5%. Overall, total spend per head on F&B increased by 12% to Rs 52 for comparable properties and including non-comparable properties it was up by 13% to Rs 52. The mgmt said that spend per head to improve in coming months on account of investment in Cinemax F&B infrastructure and improvement in F&B quality.
For the quarter, PVR sponsorship revenue increased by 28% at Rs 24.32 crore. Cinemax’s sponsorship revenue increased by 85% to Rs 11.16 crore. Overall, total sponsorship revenue increased by 42% to Rs 35.48 crore.
For FY14, the company has plans to open 83 screen of PVR of which it has opened 50 screens in H1 FY14. Cinemax will see opening of 7 screens in H2 FY14. The company will add 75 screens in FY15.
The company will be converting 10 â 12 properties of Cinemax into PVR which will lead to rise in advertisement revenue, F&B revenue and box office revenue.
The capex for FY14 will be Rs 175 â 200 crore and FY15 will be Rs 150- 175 crore.
The Company has entered into an agreement for sale of Anupam multiplex property located at Saket, New Delhi for a total consideration of Rs 52 crore. On the date of completion of sale, the company would also enter into a separate agreement with buyer for leasing back the multiplex on a long term lease
The company has re-financed its Rs 170 crore acquisition finance debt taken last year which was short term at a cost of 14.3%, is now converted to 6 years long-term debt at a cost of 11.5%. As a result, Q4 interest cost is expected to come down.
The net debt increased from Rs 583.46 crore as on 31stMarch 2013 to Rs 592.1 crore on 30thSeptember 2013.
Tax rate for FY14 will be 20% - 21%.
On being asked on closing of malls and slowdown in coming up of new malls, the mgmt said that it has signed up 400 screens for development for next 5 years.
The company has 5 bowling centres and it will open 2 more.
Blockbuster films has 16 minutes of advertisement while non-blockbuster has 7 min of advertisement. The pricing for advertisement varies between Rs 50000 to Rs 2 â 3 lakhs for 20 sec commercials ads.
Owing to periodicity of events,their is a slight cyclicality to PVR’s business…Q4 remains muted due to exams,etc.However,the bad Q3 this time was pretty unexpected.I think it makes sense to exit the stock for the time being & re-enter a few months later.Made good gains here
Disc.: Exited the stock completely today.
Hi all
I think this business is exposed to a big change which is expected to take place in a couple of years, in the name of digitization. Once you have every viewer plugged in, there are numerous talks of monetizing film content and releasing movies at home at a fraction of the cost of movie tickets. It benefit the consumers and to the film maker, and the only loser is the screen owner…Any views on this?
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Hi Akshay.This is something I too,have been pondering about.Digitisation not only reduces cost,but also has added advantages: Order movies on demand,Pause/Play anytime you want,the cost is not per person(unlike movie tickets),you can arrange whatever you want to consume & gather your friends,etc. for the movie,etc.etc.All this sounds like a Death knell for M-plex industry.And this flight from M-plex to Home can be even faster if ticket prices keep going up like they have been.Complacency does exist on this part in the M-plex industry.But the process of digitisation has been very sluggish,which means the industry may have a few more years.If these guys(especially PVR) can break into generating positive cash flows,then they it shouldn’t be such a big problem,but if debt levels stay at elevated levels then there will certainly be trouble.For the time being I think if PVR stock corrects another 10-12%,it can be looked at again.Better still,buy Cinemax for the arbitrage.
My own conviction is that this digitization is not going to affect the Mplex business by a whole lot.
People go to the cinemas for the experience. IMAX, Auro 3D, Dolby Atmos, etc. kind of stuff will not be met at home. I myself don’t watch TV at all but I may watch an average of 15 movies/year at the cinemas (but I don’t spend on popcorn, snacks or beverages).
When people have more disposable income, discretionary spending is going to increase. It may cost Rs 750 for a couple a movie now. Further, I might want to take my friends/family for outing and purely I may not be interested in the movie but it becomes a “hangout.”
In Chennai, there is a demand-supply gap. During a festival release week, the website crashes and you’ll have to maybe book atleast 4-5 days in advance. No cancellation permitted. Snacks and beverages cost more than the ticket. Ticket price is capped at Rs 120 but Mplexes have found a way by adding online reservation fee, bundling of popcorn (sometimes compulsory!), etc. The cinemas run at nearly 100% load during weekend/holidays with bookings done 2-3 days in advance.
I’m sure there should be demand-supply mismatch at outside of metros and tier I centers.
Disc: I own neither Mplex, media nor any other digitization-play businesses at this point.
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People have been watching movies on big screen for over a century now . Every decade or so there is clamor about some new technological advancement in entertainment industry soundingdeath knell fortheaterbut so far it has been quite resilient . earlier it was tv followed by colour tv , cable/satellite tv,vcr/dvd/cds,free internet downloads/streaming etc but people wontmind shelling out big bucks for watching quality content on big screen. So as long as there is good content pipeline,movie exhibition industry will thrive.
Digitization, pay per view tv has been around for longer in US/western countries that hasnt exactly closed major hollywood studios or big cinema chains over there has it? movie crazy india should follow similar trend .
Not invested currently in PVR but i wont mind picking it up if it corrects 15-20% . Hopefully another weak quarter will just make that happen, this quarter is traditionally weak anyway.
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Highlights of the call by Capital Mkt; For the quarter, the company has reported 69% growth in consolidated net operating revenues at Rs 339.39 crore. EBIDTA margin has declined by 250 bps to 15.1%. The net profit stood at Rs 13.91 crore, up by 56%. (Result is not comparable) PVR had income of Rs 224.24 crore, growth of 15% with EBIDTA margin of 14.7% decline by 300 bps. The net profit was up by 16% to Rs 12.69 crore. Cinemax had income of Rs 96.51 crore, de-growth of 17% with EBIDTA margin of 14.9%, decline of 720bps. The net profit was down by 46% to Rs 4.56 crore The consolidated net box office collection was down by 1% to Rs 196.59 crore. PVR net box collection was up by 13% to Rs 136.06 crore while cinemax was down by 23% to Rs 60.53 crore. The box office collection was low because occupancy of top 10 movies for Q3 FY14 for comparable properties was down by 6% as against same period last year. Also, Admits for top 10 movies for comparable properties was down by 17% as against same period last year. Top 10 movies admission contribution was 62% in Q3 FY14 as against 71% in same period last year. Q3 FY14 content was muted which had only 3 Big films :- Ram Leela, Krrish 3 & Dhoom 3 as compared to 7 Big films :- Student of the year, English Vinglish, Jab Tak Hain Jaan, Son of Sardar, Talaash, Dabangg 2 & Life of Pi in Q3 FY13. This year movies like R.. Rajkumar, Besharam, Boss & Bullet Raja underperformed expectations at Box office For the quarter, PVR footfalls decreased by 16% at 74 lakhs in comparable properties, with total footfalls of 97 lakhs, which is up by 7%. Cinemax's footfall decreased by 21% to 46 lakhs for comparable properties with total footfalls of 46 lakhs, which is down by 23%. Overall, total footfalls decreased by 18% to 120 lakhs for comparable properties and including non-comparable properties, it is down by 5% to 143 lakhs. The mgmt said that fall in footfalls in this quarter was aberration, largely due to poor content in Q3 FY14 vs Q3 FY13. For the quarter, PVR Average Ticket Price (ATP) increased by 6% at Rs 183 in comparable properties and including non-comparable properties total ATP was up by 4% to Rs 181. Cinemax's ATP increased by 1% to Rs 162 for comparable properties and including non-comparable properties total ATP was also up by 1% to Rs 162. Overall, total ATP increased by 4% to Rs 175 for comparable properties and including non-comparable properties it was also up by 4% to Rs 175. ATP price hike was lower due to poor content. The consolidated net F&B revenue was up by 15% to Rs 73.13 crore, PVR net F&B revenue was up by 33% to Rs 49.8 crore while cinemax was down by 11% to Rs 23.34 crore. For the quarter, PVR spend per head on F&B increased by 19% at Rs 57 in comparable properties and including non-comparable properties it was at Rs 57, which is up by 19%. Cinemax's spend per head on F&B increased by 7% to Rs 49 for comparable properties and including non-comparable properties it was at Rs 49, which is up by 7%. Overall, total spend per head on F&B increased by 15% to Rs 54 for comparable properties and including non-comparable properties it was up by 15% to Rs 54. The mgmt said that spend per head to improve in coming months on account of investment in Cinemax F&B infrastructure and improvement in F&B quality. For the quarter, PVR sponsorship revenue increased by 30% at Rs 30.29 crore. Cinemax's sponsorship revenue increased by 29% to Rs 11.66 crore. Overall, total sponsorship revenue increased by 30% to Rs 41.95 crore. PVR sponsorship revenue is mostly driven by volume, while of Cinemax largely by value. The mgmt said that same store growth rate for this year is flat or slightly negative on exhibition side, compared to 18% last year and 10% a year back. For FY14, the company has plans to open 80 screen of PVR of which it has opened 60 screens. The company is present in 95 locations, with 408 screens and 98772 seats. Entertainment tax exempted screens are 75. It will open 21 screens in Q1 FY15 and will open total 60 â 70 screens in FY15. The mgmt expects 1000 screens in next 5 years. The company's 13 â 15 screens are waiting for license. The capex for FY14 is Rs 165 crore. Bollywood contributes 65%, Hollywood 25% and Regional 10% - 12% to box office collection. 20% - 25% of property goes for rent escalation every year. The rent is renewed once in 3 years by 13% - 14%. 34% of ticket sales come from online, of which 50% from PVR site and 50% from BookMyShow site. Once, this number touch 40%, man hour can be saved. The company has 6 bowling centers and most of them are EBIDTA positive. It plans to take that number to 11 -12 in next 5 years. The Company is under Minimum Alternative Tax (MAT) for the quarter which has been provided for. Further, deferred tax asset (net) has been considered only to the extent of virtual certainty. The average tax rate for FY15 is 25% and 30% for FY16. The consolidated net debt is at Rs 560 crore. The mgmt said that it is seeing great potential for multiplex industry. India has negative growth in screens, Lot of single screens are closing down, as customers are moving towards multiplex experience and also the real estate value of it is high. As such there is no threat from multiplex competitor's expansion. There is opportunity for 2 â 3 players in some cities. At present, India has 2000 multiplex screens and 7000 single screens. 5 years onwards, 2000 multiplex screens are expected to come up. The mgmt expects 25 â 30% top-line growth in FY15. |
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Highlights of the call by Capital Mkt;
For the quarter, the company has reported 32% growth in consolidated net operating revenues at Rs 314.23 crore primarily driven by strong performance of low budget films like Queen and Two States. EBIDTA margin has inclined from 7.6% to 11.1%. The loss at net profit level was at Rs 5.14 crore.
For FY14, the company has reported 67% growth in consolidated net operating revenues at Rs 1351.23 crore. EBIDTA margin has inclined from 15.4% to 16.4%. The net profit increased by 14% to Rs 50.39 crore. (Result is not comparable, as Cinemax become subsidiary only in Jan, 2013).
The consolidated net box office collection was up by 20% to Rs 174.23 crore for Q4 and up by 13% to Rs 795.16 crore for FY14.
For Q4, footfalls increased by 5% at 119 lakhs in comparable properties, with total footfalls of 139 lakhs, which is up by 21%. For FY14, footfalls decreased by 6% at 456 lakhs in comparable properties, with total footfalls of 599 lakhs, which is up by 9%.
For Q4, Average Ticket Price (ATP) decreased by 2% at Rs 161 in comparable properties and including non-comparable properties total ATP was down by 2% to Rs 160. For FY14, Average Ticket Price (ATP) increased by 4% at Rs 170 in comparable properties and including non-comparable properties total ATP was up by 4% to Rs 168. ATP grown marginally as mgmt tried to fill various non-peak hour slots to attract footfalls. The mgmt has guided the growth of 5-6% in ATP in FY15
The consolidated net F&B revenue was up by 46% to Rs 71.28 crore for Q4 and by 29% to Rs 298.08 crore for FY14.
For Q4, spend per head on F&B increased by 17% at Rs 56 in comparable properties and including non-comparable properties it was at Rs 56, which is up by 17%. For FY14, spend per head on F&B increased by 16% at Rs 54 in comparable properties and including non-comparable properties it was at Rs 54, which is up by 16%.
Sponsorship revenue increased by 48% at Rs 32.85 crore for Q4 and by 44% to Rs 141.86 crore. Sponsorship revenue increased because of takeover of Cinemax and its offers & discounts were matched to that of PVR which has higher per screen revenue. The top 15 locations i.e. 35 screens contribute ~70% of the total ad revenue. The mgmt expects sponsorship revenue to grow 18-20% in FY15.
The company is looking at corporate booking of seats. Presently, corporate booking revenue is small, Rs 12.5 crore for FY15. However it sees a big potential in this segment. Two marketing employees are allocated at every screen who will market to corporate/colleges in the vicinity of 8-10 kms
For FY14, occupancy rate was ~34%.
The company opened 17 screens in 3 properties in Q4 and total 73 screens in 13 properties in FY14. The company uptil now has in total 421 screens with 1.01 lakh seats in 97 locations. For FY15, it will open 60 screens in 12 properties. The company target to add 300-450 screens in next 3-4 years.
The management has also taken a write off of Rs 300 crore of goodwill from reserves and will amortize balance Rs 100 crore over next 10 years.
The company is planning to re-brand" all the Cinemax screens to PVR which will take 24months. So far only 1 Cinemax screen is rebranded to PVR and company has seen 25% increases in revenue.
Annual maintenance capex comes at 1-2% of revenue. Every screen requires refurbishment after 6-8 years to keep the cinema maintained and fresh. This amounts to 20-30% of original capex. Capex required per screen is on an average Rs 2 â 2.5 crore. Of the total 421 screens, 2/3rd screens are older than 2 years.
The company is expected to benefit immensely with implantation of GST. Average entertainment tax is believed to reduce from 23% currently to 16% post the implementation of GST. Also, company will be able to avail tax credit of tax paid on input cost if the act is implemented which will reduce its tax liability.
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Highlights of the call by Capital Mkt;
- For the quarter, the company has reported 9% growth in consolidated net operating revenues at Rs 400.02 crore. EBIDTA margin has declined by 579 bps to 14.7%. The net profit stood at Rs 9.2 crore, declined by 67%. The company reported muted results mainly due to weak content delivery.In last 7 months, the company has opened 33 screens and 5 new properties. In total, the company has 454 screens in 102 locations.The mgmt said that it will open 65-70 screen in the current year
- The consolidated net box office collection was up by 3% to Rs 228.15 crore. Occupancy of top 10 movies for Q2 for comparable properties was down by 8% as against same period last year.So far content delivery has been strong in October. Given the content pipeline in November and December, the mgmt expects the growth would continue. The mgmt said that it expects upcoming quarters to be strong on the back of robust content pipeline. However, loss of revenue due to weak content in H1 FY15 would not be fully compensated in H2 FY15.
- For the quarter, footfalls decreased by 14% at 139 lakh in comparable properties, with total footfalls of 157 lakh, which is down by 5%. The mgmt said, footfalls are 50-50 percent on weekdays and weekends.For the quarter, Average Ticket Price (ATP) increased by 9% at Rs 186 in comparable properties and including non-comparable properties total ATP was up by 6% to Rs 180.The mgmt said that ATP will grow 5-6% annually.
- The consolidated net F&B revenue was up by 14% to Rs 90.81 crore. Spend per head (SPH) on F&B increased by 21% at Rs 65 in comparable properties. Volume grew by 14%, while price grew by 7%. Including non-comparable properties SPH was at Rs 64, which is up by 20%. The company has taken various initiatives undertaken to drive strike rate (volume) and average transaction size (value) and pricing.
- Advertisement revenue continues to remain on strong growth trajectory. It has grown by 14% to Rs 40.7 crore. The mgmt said that it expects ad revenue to grow by 15-17% for full year.The mgmt said that the company is putting effort to optimize the cost structure by managing power consumption, repair and maintenance and people management. The impact of the same would be reflected in next 2-3 quarters. The mgmt noted that savings could be to the tune of Rs 2-15 crore annually
- The capex for FY15 is Rs 170 â 175 crore out of which Rs 130 â 140 crore will be utilized for new screen and rest for renovation & regular maintenance.The company has no repayment plan of the current year. It has refinanced Rs 150 crore to long term paper of 7 year at average cost of 11% reducing company level cost of debt by ~75 bps.
- For PVR Pictures, the mgmt expects top-line of Rs 45-50 crore and EBIDTA of Rs 3-4 crore fir FY15
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Highlights of the call by Capital Mkt;
- For the quarter, the company has reported 25% growth in consolidated net operating revenues at Rs 420.3 crore. EBIDTA margin has inclined by 516 bps to 19.8%. The net profit stood at Rs 31.55 crore, inclined by 123%.The company reported good results mainly due to 4 blockbuster films in the quarter. The mgmt said that the content delivery in Q4 so far has been decent.
- In last 10 months, the company has opened 41 screens. In total, the company has 462 screens in 104 locations. In Q4, the company will open 21 screens and end FY15 with 483 screens. It will reach 500 screen mark by end of Q1 FY16.The consolidated net box office collection was up by 18% to Rs 230.66 crore.
- For the quarter, footfalls increased by 3% at 1148 lakh in comparable properties, with total footfalls of 160 lakh, which is up by 12%.For the quarter, Average Ticket Price (ATP) increased by 7% at Rs 187 in comparable properties and including non-comparable properties total ATP was up by 5% to Rs 184. The company followed a differentiated pricing strategy with a mix of premium weekend blockbuster pricing along with an affordable weekday pricing offering best of both worlds.
- 4 Blockbusters - Bang Bang, Haider, Happy New Year & PK in the quarter helped maximize the ATP.The mgmt said that increase in ATP has helped to offset declining footfall scenario.The consolidated net F&B revenue was up by 35% to Rs 98.78 crore. Spend per head (SPH) on F&B increased by 24% at Rs 67 in comparable properties. Volume grew by 16%, while price grew by 8%. Including non-comparable properties SPH was at Rs 67, which is up by 23%. The company’s strategic pricing change, mirrored with block buster release, helped to achieve the maximum growth
- Advertisement revenue continues to remain on strong growth trajectory. It has grown by 28% to Rs 53.85 crore. 4 Blockbusters in the quarter helped maximizing revenue.The mgmt said that the company revenue growth was lower compared to INOX on account of lower base for Inox Leisure, few of the south Indian properties were under renovation and Part of Gujarat where PK has registered lower acceptance.
- The capex on annual basis stand at Rs 150 â 175 crore. The capex for Cinemax renovation is Rs 40 -50 crore spread over 24 months.The company will buy back 46% stake in PVR leisure from L capital at total consideration of Rs 37 crore, post this acquisition PVR leisure will be 100% subsidiary of PVR. L Capital will remain one of investor in PVR.The mgmt has no plan to expand PVR leisure going forward.Tax rate will be at lower single digit for next 24 months due to deferred taxes.
Conference Call - from Capital Markets
Will open 60 – 70 screens in FY16
PVR held a conference call to discuss the results for quarter and year ended March 2015. Top management addressed the meet.
Highlights of the call
• The mgmt said that 2014-15 was not good for producers as well as for exhibitors.
• For the quarter, the company has reported 5% growth in consolidated net operating revenues at Rs 299.5 crore.. The loss at net profit stood at Rs 35.65 crore.
• The consolidated net box office collection was down by 12% to Rs 157.85 crore. Poor box office collected due to poor movie content and world cricket impacted the performance in Q4.
• For the quarter, footfalls decreased by 19% at 106 lakh in comparable properties, with total footfalls of 122 lakh, which is down by 12%.
• For the quarter, Average Ticket Price (ATP) increased by 6% at Rs 171 in comparable properties and including non-comparable properties total ATP was up by 5% to Rs 168.
• The consolidated for Q4 net F&B revenue was down by 3% to Rs 69.19 crore. Spend per head (SPH) on F&B increased by 11% at Rs 62 in comparable properties. Including non-comparable properties SPH was at Rs 62, which is up by 11%.
• Advertisement revenue has grown by16% to Rs 38.10 crore.
• The gross margin in Q4 was down because the company prices its F&B items in line with ticket price. The company reduces F&B price if content is not good. As Q4 didn't have good content, F&B prices were low. The mgmt said that it has dynamic F&B pricing policy which is different on weekdays and weekend. The F&B prices are high during good movies.
• Trade receivables were up because advertising revenue is also up.
• Loan and advances were high due to increase in security deposits for opening new properties and also certain properties whose lease were expired have been leased again.
• The mgmt said that content were good in April and May as a result it has seen double digit growth in April and May months. June also look goods. Going forward, content pipeline looks good.
• PVR added 50 screens in FY15 and closed 7 screens. The company has guided for the addition of 60 – 70 screens in FY16.
• PVR acquired a 70% stake in a popcorn company, 4700BC popcorn, for Rs 5 crore
• Net debt at Rs 720 crore, was up Rs 160 crore and has likely peaked.
Disc: Not Invested
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PVR held a conf call to discuss acquisition of DT Cinemas.Highlights by Capital Mkt
PVR entered into a definitive agreement to buy DT Cinemas, which has a portfolio of about 29 operational screens and 10 screens to be commissioned in a year.DT Cinemas, a wholly owned subsidiary of the DLF group, has a total seating capacity of more than 6200 seats by virtue of its 29 screens spread across Delhi (seven screens in Vasant Kunj, six in Saket are some of the premium properties), Chandigarh and Gurgaon.Apart from the 29 operational screens, PVR also gets 2 properties which will have 10 screens to be commissioned in about a year. 1st property will open in next 3 – 4 months and 2nd one in Q4 FY16.Out of 39 screens, 12 screens are owned by third party.
The deal is valued at about Rs 500 crore. The company will pay Rs 350 crore on deal closing, Rs 100 crore on its 1st new property opening and rest on other property opening.The company will issue of 5000000 fully paid Equity Shares of the Company at a price of Rs 700 per share inclusive of premium aggregating to Rs 350 crore, on preferential issue basis
The latest acquisition will led to 21% market-share in seating capacity in NCR region. The company will have to file before competition commission its latest acquisitionRental for these 39 screens are on revenue sharing basis which is around 15%. The mgmt said that this will help in OPM improvement.
Only one location of PVR is close to DT Cinemas.Owing to its prime locations, DT Cinemas has ATPs of Rs 250 at a premium to the ATPs of PVR while spends per head (SPH) also command a premium.
The conversion cost will be very less as most of DT cinemas properties have high quality seats and technology. DT’s properties are well maintained. Only expense will be brand change from DT Cinemas to PVR which will be minimal.
Earning will be accretive from FY17 as tractions will closed at later part of the year.PVR would gain a right of first refusal in the malls developed by DLF in the years ahead.
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Highlights of the call by Capital Mkt
For the quarter, the company has reported 34% growth in consolidated net operating revenues at Rs 486 crore. The net profit increased by 658% to Rs 58.05 crore.The consolidated net box office collection was up by 35% to Rs 274.19 crore on back of number of hits in Bollywood and Hollywood movies - Tanu weds Manu returns, PIKU, ABCD 2, Fast & Furious 7, Avengers 2, etc.,For the quarter, footfalls increased by 16% at 168 lakh in comparable properties, with total footfalls of 190 lakh, which is up by 25%.
For the quarter, Average Ticket Price (ATP) increased by 5% at Rs 188 in comparable properties and including non-comparable properties total ATP was up by 4% to Rs 183.The net F&B revenue increased by 46% to Rs 129.79 crore. Spend per head (SPH) on F&B increased by 16% at Rs 75 in comparable properties. Including non-comparable properties SPH was at Rs 74, which is up by 16%. Majority of F&B revenue growth was driven by volumes while realization improvement was 6-7%. Gross margin in F&B segment expanded 441 bps to 26.7% due to stronger negotiation with popcorn suppliers and higher sale of combos.Third party kiosk revenue has reduced as focus is on internally managing the F&B kiosks, which resulted to lower other operating income.Advertisement revenue has grown by 27% to Rs 45.69 crore driven by both yield improvement and inventory creation. Yield improvement was around 8%. The mgmt expects advertisement revenue to grow in the range of 18-20% in FY16
The company has taken write-off for the property development which was initiated by Cinemax two years back, which has been taken as EO item. Due to delays in development, the management decided not to proceed the same.The company rolled out 10 new screens with 2 properties during Q1. Total screen count at the end of Q1 FY16 stood at 474 vs 444 in Q1 FY15. The company has guided for the addition of 60 – 70 screens in FY16 and FY17.The mgmt said that for the first time in the history of the company, it has registered single day occupancy of 91% for Baahubali and Bajrangi Bhaijaan. Bajrangi Bhaijaan has done Rs 150 crore of net box office collection in first 5 days, it is expected to do Rs 300 crore of net box office collection. Baahubali is expected to run for next 2 weeks more. The mgmt said that the quarter looks good as content pipeline for the quarter is good.
Increase in E-Tax in Delhi would be offset by increase in ATP, effective from 24th July, 2015. From 20th July, single screens in Delhi took price up.The board has approval to raise Rs 500 crore through NCD pertaining to Rs 150 crore debt funding required for DT Cinema acquisition and existing debt re-financing. The company re-financed Rs 300 crore of debt in FY15 and saved 80-100 bps on finance cost, savings would be higher for FY16
Benefit of Cinemax integration synergies are largely in the financials. Cinemax properties are now operating at par with PVR.
The company at presently not looking at inorganic opportunity and would focus on organic growth. 60-70 screens would be rolled out this fiscal. Southern India would be the focus area of expansion. It will open 60-70 screens this fiscal.Gross debt down by Rs 50 crore compared to March quarter to Rs 650 crore.
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In Finance there is a concept called operating leverage. If you observe q1 results of PVR there is a dramatic increase in profits Q to Q.
This is because with cinemas the costs are relatively static and constant e.g. rent, electricity, content cost etc. But when revenues increase beyond this fixed cost barrier each marginal increase in revenue directly adds to the bottom-line.
PVR has reached that inflexion point. You will see that the PE ratio of PVR is above 60. But that is a mere illusion. In Q1 the EPS was 14.2 in spite of there being no major hits.
Q2 is going to be a blockbuster quarter because of bahubali and bajraangi bhaijan. Q3 with Diwali and Christmas is traditionally the best quarter and there are many big films like bajirao mastani and shahrukh khans fan lined up. Q4 is the worst due to IPL and exam seasons.
This is what I predict in the next 3 quarters in the attached excel
If you analyze it properly the employee cost, depreciation, interest costs and other expenses are relatively constant. But a surge in expected sales drives the operating leverage and profits should surge in q2 and q3 while q4 will be as usual in losses.
So I am projecting a Rs. 55 to Rs. 60 EPS this year. So that means a forward PE of 13 to 14 at current prices
Now PVR is the undisputed leader in this industry and will command a premium valuation. In addition they have acquired DT cinemas from DLF which is not factored in the calculations.
Employees Cost 41.74 35.82 36.96 36.15 34.11
Depreciation 29.20 25.32 32.28 31.09 29.14
Other Expenses 331.83 252.98 300.23 276.77 245.80
Interest 21.79 20.31 19.80 20.06 19.24
Tax 0.57 0.46 0.32 -0.03 0.06
If you see employee cost is relatively stable and so is depreciation.
Sequential quarter it will not increase.
So we can assume employee cost as 42 crores, Depreciation at 30 crores and Other expenses at 330 crores. Interest is around 22 crores and tax is 1 crore.
So if q1 was 485 , with bahubali bajrangi and MI Q2 will be much better. Now even assuming that it is equal to 500 crores. You do the calculation (500 - 42-30-330-22-1) = 75 crores of profit or 18 EPS.
So you will observe operating leverage at its best. So here are the different scenarios.
Sales Cost Profit EPS
500 -425 75 18.25
525 -425 100 24.33
550 -425 125 30.41
575 -425 150 36.50
600 -425 175 42.58
So if you see just 100 crores of extra earnings will increase EPS by 2.33 times.
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I had two issues in my projections for the year one is the cost structure and another is the tax rate.
Now i have more clarity on the same based on the news items and investor presentations.
For the cost structure the variable cost is around 32 percent of total income and the rest is fixed cost.
So in q1 the total cost is 402 crores. So out of the same variable costs are 486 crores X 32 percent or Rs. 160 crores and 242 crores are fixed costs.
So assuming a target income of 2000 crores for the year the total variable costs for rest of the year will be
528 crores in line with increasing sales while total fixed costs will be 727 crores.
For taxation most of new properties are in a tax holiday so no major tax increase there.
So now we have following projections
Sales 2000 crores
Total cost 1689 crores
EBIT 399 crores
Interest 88 crores
EBT 315 crores
Tax 3.57 crores
PAT 308 crores
EPS 75
Above does not include impact of DT cinemas acquisition
So with a PE of 20 a minimum of 1500 and with a PE of 25 1875 can be expected in 6 months time.
Hi I just have one problem which is equity Dilution. Company consistently dilutes equity to generate profit. However I have not done enough calculation that how much dilution of equity has effected how much return.
i think the Projections are bit too optimistic .Plus operating leverage doesnt quite work the way you are envisaging for PVR, as the company has very little control over the product (content) it sells .its not like they can churn out hits from their assembly line at will.one or two Blockbuster misses can spoil the whole quarter.
Q1 was unprecendented and historic with 8 movies netting over 80 crores each and as many as 6 of them crossing 100 crore mark . this just doesnt happen.EVER! .
Apart from Q2 i will be surprised if the rest of the quarters come close to the 270 crores box office receipts figures .
For Q2 here are my rough estimates for PVR’s share of nett box office revenues for the major releases :
Bajrangi Bhaijan - 65 crores
Bahubali (all versions) - 50 crores
Drishyam+Brothers+MI5 - 40 crores
Ant Man+Inside out+Minions - 12 crores
Other 4 big hindi releases(hero,katti batti,welcome back and phantom) - 50-60 crores
Regional and other small releases for the quarter will probably add around 70-80 crores which will take the net boxoffice to around 300-310 crore range and consolidated
revenue for the quarter to 520-530 crores.Q3 and Q4 will at best add around 750-800 crores taking the yearly revenue to around 1800 crores.
Ball park estimates for full year below :
Revenues -1800 crore
Cost - 1550
EBIT - 250
interest 85
Tax - 3
PAT -162
EPS - 39
Regarding ,DT cinema acquisition management expects it to add around 45 crores to EBITDA . Given 10% equity dilution and increased interest cost of around 15-20 crores per year for the acquisition iam not expecting it to add much to EPS figures, 1 or 2 bucks at best.