dilutions have been used to fund acquisitions and boost screen count .so far the management has done good job with it. Now after consolidation in multiplex industry only serious players are left so possibility for acquisition and dilution remains low
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Thanks
And i respect your views.
Let me explain you the concept of operating leverage. If you study the analyst presentations on PVR site their variable costs are around 33 percent of the sales.
The total fixed costs are around 1050 crores per year.
In Q1 the total operating costs were around 402 crores.
Variable operating costs will be 486 crores X 33 percent = 160 crores
So Fixed operating costs will be 242 crores or Rs. 969 crores per year
Add interest costs of 88 crores and total fixed costs this year should be 1057 crores.
Taxation I am assuming nominal costs as most of screens are in tax holiday.
So the break even sales for the year are 1050 / (1-.33) = 1578 crores.
So each rupee of sales above 1578 crores and net margin will increase by 67 paisa.
Now with your assumption of Rs. 1800 crores it means a profit of (1800 - 1578) = 148 crores or a EPS of 35 which matches your prediction.
Now read this:
Check this for box office collections
In Q1 there was not a single blockbuster hit. There were many good churners and they netted 485 crores.
If you check the box office collections on koimoi in Q2 due to blockbusters like bahubali , bajrangi bhaijan this quarter till August 17 they crossed the entire box office collections they achieved in Q1, If you do a calculations we have one month remaining in q2 and the total box office collections in Q1 is 510 crores while entire q2 is 561 crores. Please remember the 510 crores above does not include the bahubali collections of 100 crore plus in Hindi (and do not forget regional collections as well). Mission impossible collected an additional 50 crores.So with one month remaining in q2 collections are 660 crores (Adding MI5 and bahubali) against q1 collection of 561 crores
So even if the new releases like phantom garner 60 crores in one month we will have total box office collections in q2 equal to 720 crores which is 30 percent rise over q1 which comes to around 630 crores.
Q3 has big releases (Salman khans soorja barjatya film, Bajirao mastani etc). So we wait for the verdict.
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Hi to summarize again based on koimoi box office data
Q1 : Collections 561 crores
Q2 (Till today) Collections : 510 crores
- Bahubali (Hindi) : 100 crores
- MI 5 : 50 crores
- Upcoming in September : 60 crores
Total : 720 crores
So Q2 should be atleast 30 percent above Q1
They already talked about Bahubali and Bajrangi on last earnings call so might have frontloaded revenue numbers.
There could still be some surprise element from other releases like Welcome Back. In long term, I am not enthused about PVR for the following reasons.
- Company does not have strong capabilities of merger integration and have overpaid for acquisitions. They wrote-off Rs305 crore in goodwill from Cinemax’s deal, which was valued at Rs543 crore.
- Management ignored lessons from Cinemax’s deal and paid a higher multiple for DT Cinemas’ acquisition. They might write-off goodwill soon after realizing that they overpaid for the transaction.
- Management has reduced its stake significantly, which most VPers have already discussed here.
- Sellside has been modeling 4-5% constant increase in ATP without realizing that blended ATP would either come down or stay stable as pressure from small town expansion kicks in. If PVR wants to deliver on its growth plans then it would have to open significant number of theatres in small towns. Average ATP in small towns ranges between Rs80-Rs120, while PVR’s existing ATP is close to Rs180.
- PVR might also face lower occupancy in small towns. Most of the new construction is happening in suburban areas in small towns, where footfalls are lower compared to central locations. In absence of location advantage, PVR’s theatre might face lower occupancy. I already notice this effect in some small towns.
- PVR’s levered balance sheet and merger history does not give me any comfort in investing in PVR’s stock.
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I am not sure about the private letter signed by the promoters with Multiples PE firm . At the outset I feel its not a great thing from a Corporate Governance view point. If members can throw some light will be great.
@hrishikesh
waiting for your comment on below par Q2 numbers when it comes to NP/EPS
http://www.bseindia.com/xml-data/corpfiling/AttachLive/A4E88A43_8E4A_4995_A681_0E81684373FF_125036.pdf
PS - hold a small position
Highlights of the call by Capital Mkt
For the quarter, the company has reported 19% growth in consolidated net operating revenues at Rs 474.6crore. The net profit increased by 405% to Rs 41.13 crore.The consolidated net box office collection was up by 20% to Rs 274.55 crore on back of number of hits like Bajrangi Bhaijaan, Baahubali, Welcome Back, Drishyam and MI Rogue Nation.For the quarter, footfalls increased by 14% at 173 lakh in comparable properties, with total footfalls of 188 lakh, which is up by 20%. Occupancy ratio for increased from 32% to 37%.For the quarter, Average Ticket Price (ATP) increased by 4% at Rs 188 in comparable properties and including non-comparable properties total ATP was up by 3% to Rs 187.
The net F&B revenue increased by 32% to Rs 119.59 crore. Spend per head (SPH) on F&B increased by 10% at Rs 69 in comparable properties. Including non-comparable properties SPH was at Rs 68, which is up by 9%.In F&B, growth was consistent. Cost down because of looking for more combo sales, beverages sales were more, better supply chain managed, raw material price managed better, and reduction of wastage. Going forward, the mgmt said that COGS at 25-26% level is manageable.
Advertisement revenue has grown by 13% to Rs 46.13 crore.
Advertisement revenue growth weak in comparable properties in Q2, as the quarter is normally slow. Q3 is most important quarter due to festive season. Also Q2 had lot of regional films, which impacted ad revenue.
The mgmt expects 10-15% ad revenue growth for FY16.The company has opened 13 screens in Q2. The mgmt said that 29 screens are ready, waiting for licenses. 22 screens will open in Q3. Looking for 67 screens to open in FY16. Looking at opening 70-80 screens every year for next 3 years.
In Q2, regional films contributed 29% in term of revenue and hollywood 15-16%. Baahubali is one of the reason for rise in regional film contribution.
E-tax on gross box office has increased from 23% to 26.7% and on net box office from 18.7% to 21.1%.
The company was not able to pass on entire tax in Delhi to customers.
Rental cost inflation – 12-15% goes up for every 3 year.Employee cost is 8.5% of sales on annualized basis.DT cinema matter is pending with CCI.
The mgmt said that October had good content with films like Singh is Bling, Pyaar ka Panchnama 2 and Talvar. The mgmt sees good content pipeline from November 2015 – February 2016.Tax rate will be 22% for FY16.
PVR Revenues came at 474 cr ,below lower end of my forecast of 520 crores. The estimates were off mainly because of the following reasons:
PVR’s share of Bajrangi bhaijaan collections came in at 52 cr vs 65 cr est. . this movie played more broadly across the country than i thought , collecting a bigger chunk of boxoffice collections outside of key urban areas.
PVR’s share of Bahubali revenues were at 36 cr vs 50 cr estimated. This was always going to be tricky.its difficult to project for regional movies as all sort of wild estimates float around .
F&B revenues were lower than i factored in, as per management this is because of reduced Spend per head due to higher contribution from regional movies compared to Q1.this also led to lower margins.
i will do a similar exercise towards the end of Q3 and see how close i come to actual figures.
Disclosure:
modest position <3% of portfolio . i trade in and out of stock based on the upcoming movie lineup and valuations.
CONFERENCE CALL
PVR
New screen guidance for FY16 has been lowered to 53
PVR held a conference call to discuss the results for quarter ended December 2015. Top management addressed the meet.
Highlights of the call
For the quarter, the company has reported 19% growth in consolidated net operating revenues at Rs 500.45 crore. The net profit decreased by 54% to Rs 30.04 crore.
The consolidated net box office collection was up by 9% to Rs 251.20 crore on back of films like Bajirao Mastani, Prem Ratan Dhan Payo, Dilwale, Tamasha and Pyaar ka Punchnama 2.
For the quarter, footfalls decreased by 1% at 150 lakh in comparable properties, with total footfalls of 165 lakh, which is up by 3%. Occupancy ratio was flat at 34%.
For the quarter, Average Ticket Price (ATP) increased by 9% at Rs 201 in comparable properties and including non-comparable properties total ATP was up by 8% to Rs 200.
ATP has increased except for regional movies where it is lower. Bollywood and Hollywood movies has same ATP.
ATP grows with inflation. Q3 had too many hit films and increase prices in some place to pass on the taxes.
Occupancy will remain around 33- 40% range.
Occupancy make up for lower pricing in Karnataka as screen numbers are very low.
ATP on an average in Delhi is Rs 250, Mumbai is little lower than Delhi and Bangalore is lower than Mumbai.
ATP in Chennai which is under control regime in terms of pricing is at Rs120, in Hyderabad which is also under control regime in terms of pricing is Rs 150 (for incliner its Rs 225) and in Bangalore which is a free market in terms of pricing Is Rs 200- 210.
The net F&B revenue increased by 13% to Rs 113.58 crore. Spend per head (SPH) on F&B increased by 12% at Rs7 4 in comparable properties. Including non-comparable properties SPH was at Rs 74, which is up by 11%.
SPH growth – 60% comes out of pricing and 40% is from volume.
Advertisement revenue increased by23% at Rs 63.60 crore in comparable properties. Including non-comparable properties it has grown by 29% to Rs 69.26 crore.
Advertisement revenue growth in Q3 due to big release, Diwali season and lot of products launches by the industry. Also charge some premium for a week where 2 big blockbuster films came in. The company has grown by volume and value. Q4 is slowest quarter, but it will also see double digit growth.
Advertisement revenue will depends on films and also perception of film. It is mix of pricing and volume strategy. The company is also looking at off screen advertisement in its catchment.
PVR Pictures has distributed few films on which it has earned an average commission of 3-5% resulting in lower operating margins for the quarter on a consolidated basis.
Dilwale film performance was not upto the mgmt expectation, as a result the company got low commission in distribution business.
Distribution is a commission business. Total capital investment is $ 2.5 mn. Gross margin in it is 4-5%.
In Q4, doing distribution of few Hollywood movies which is in mid budget.
Hollywood margin is 20% plus but there is performance risk taken by the company as it buy movie before release. In Hindi, it don’t take performance risk.
In distribution business, Hollywod will be focus area. It will do 40-50 Hollywod films a year and 5 – 6 Bollywood films of mid to large budget. It’s not focus area but more opportunistic area
Employee expense up in Q3 due to Rs 5 crore of bonus provision and 8-10% of annual increment.
Rental cost up due to new screens opening. Normal rental growth on existing properties is 5%
The company became free cash flow. Going forward, the company will do organic growth through internal accrual…
Q4 started very well.
The company is waiting for license of 3 more properties which has 27 screens.
DT cinema – the mgmt said that before end of FY16, it will get requisite approval.
Bowling revenue was flattish for 8 quarters. The company has taken call of not to grow business. It has good healthy OPM upwards of 20%. Its free positive cash flow business with zero debt.
E-tax – 13 – 15% screen ratio will remain
Tax outgo is expected to remain at Q3FY16 levels as prior period accumulated losses has been adjusted with strong performance in H1FY16. However, from cash flow perspective outgo will be at MAT level.
Capex for FY17 is Rs 175 -200 crore out of which Rs 45-50 crore is maintenance capex.
New screen guidance for FY16 has been lowered to 53 as compared to stands at 60-70 screens earlier. Reason for lower screens addition is attributable to delays in license issuance. The mgmt said that couples of screens will be push to April and May due to late opening of some mall.
The company has repaid Rs75 crore of debt in 9M FY16 with total outstanding net debt of Rs 650 crore as of Q3 FY16
52 screens in FY16, guidance of 65 in FY17
link
All triggers positive for PVR - +ve ticket price growth, +ve footfall.
However f&b segment is disappointing for a Company which has huge potential. The Company has an almost monopolistic position in the industry (atleast in North India) and they’re expanding in the right channels by scaling IMax, 4dx and other technologies in India. The future can be really exciting for PVR if they can figure out their cash flow position and reduce debt and expand margin in other segments.
CONFERENCE CALL - from Capital Market
Will open 65 screens in FY17
PVR held a conference call to discuss the results for quarter ended March 2016. Top management addressed the meet.
Highlights of the call
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For the quarter, the company has reported 39% growth in consolidated net operating revenues at Rs 419.05 crore. The loss at net profit stood at Rs 10.35 crore Vs Rs 35.56 crore in the corresponding period of last year.
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The consolidated net box office collection was up by 36% to Rs 214.39 crore on back of films like Airlift, Neeraj,
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For the quarter, footfalls increased by 18% at 136 lakh in comparable properties, with total footfalls of 153 lakh, which is up by 26%. Occupancy ratio increased from 27.4% to 28.8% in comparable properties YoY.
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For the quarter, Average Ticket Price (ATP) increased by 9% at Rs 183 in comparable properties and including non-comparable properties total ATP was up by 9% to Rs 182.
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ATP growth of 7% in FY16 was due to one off hike taken in Delhi.
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ATP for Tier I cities ~Rs200, Tier II cities ~Rs160 and Tier III cities -Rs100
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Expects ATP rise of 3-5% every year.
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Occupancy Rate – 34% is comfortable number looking forward,.
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The net F&B revenue increased by 50% to Rs 103.70 crore. Spend per head (SPH) on F&B increased by 17% at Rs72 in comparable properties. Including non-comparable properties SPH was at Rs 73, which is up by 18%.
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The mgmt said that there is further headroom to increase F&B spends clearly visible. New idea and initiative taken are - launching organic popcorn, In house juice and coffee and merchandise for kids. As per mgmt, SPH to ATP can go as high as 80-100%,
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Advertisement revenue increased by 15% at Rs 41.81 crore in comparable properties. Including non-comparable properties it has grown by 19% to Rs 45.45 crore.
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The company enjoy 30-40% ad rate premium over other operators.
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Employee cost was higher on account of - Rs7 -8 crore due to statutory bonus clause and new screen additions in FY16
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E-tax on net box office has increased from 20% to 21.8%. Marginal impact of Delhi tax will be seen in FY17
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The company opened 25 screens at 3 properties in Q4. In FY16, 52 screens in 8 properties were opened. With this, the company has 524 screens in 114 properties. Including DT cinemas, total numbers of screen will be 560. The company has already opened 8 screens uptil now in Q1 FY17. The company will open 65 screens in 12 properties in FY17
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Consolidated financials numbers including DT cinema to come from Q2 FY17
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Movie production and distribution business stood at Rs 22.8 crore
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The mgmt said that in April, Jungle book performed very well and paid off for the low performing movies. Jungle book was 3rd largest gross contributor for PVR. In May, regional movies like Sairat has performed well.
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E-commerce contribution remains in the range of 10% to total ad revenue. Expect Ecommerce to perform on similar lines in FY17
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The company plans to open up Director cut properties - Delhi-2, Banagalore-1, Pune-1 and Mumbai-1
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Bluo- One more property to come up in Dec-16 in Jalandhar .
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PVR take projectors on lease, which according to new accounting standard would be the part of financing lease. So in accordance with this, cost would be reclassified as depreciation /Interest cost vs rental cost now
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PVR pictures- Hollywod film distribution - The company take all rights, like television, digital and new platform rights. These are deal for 10-15 years. The company is doing this business for last 17-18 years. The company have a library of 250 films, whose acquisition cost has been written off. This contributes to top and bottom line of the company. The company dominated independent hollywood films, almost 90% of those films come in India through PVR. The prices at which it get films are fairly competitive. The company have pipeline of profitable films, which comes for distribution through PVR.
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Going forward, ad revenue growth to remain in the range of 19%
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Capex for FY17- Rs 200 crore.
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Tax rate: Tax benefits are over, will be accounting for full tax rate
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I have found analysis from Stock Axis on this M&E sector.
PVR hopes to add Rs 200 crore revenues, EBITDA of Rs 40-50 crore from DT Cinemas buy http://www.moneycontrol.com/news/business/pvr-hopes-to-add-rs-200-crore-revenuesdt-cinemas-buy_6906461.html
From Moneycontrol, Tulsian’s view on PVR:
I agree with that the management commentary has been positive and in fact that has always remained positive, but if you really go by the Q4 numbers and if you the valuation. Honestly, if you really ask me, I see this pure as a momentum and whenever you see this kind of momentum coming in, a while back we have talked about the Mandhana Industries, in fact, the same kind of momentum was seen in these stocks also. I am not saying one can compare PVR with the same other stocks, but after stock having moved beyond a point and when you are giving a PE multiple of maybe 20 plus or 25 plus, you cannot expect company to show losses in any of the quarters merely on the pretext that you had IPL, you had world cup or you had some of the flop release and all kind of things, so I am not comfortable with the valuations and I won’t be taking an investment call on the stock and in fact, I won’t hesitate in giving a profit booking advise also at the current level.
I kind of agree with this. The kind of business standing PVR has in the industry, it should be dictating the trend rather than following one. But the company time and again fails to build upon its dominant position and lags the kind of growth it has the potential to show.
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To understand the scope of this business, just look at the earnings made by Warcraft in China and we are 15 yrs behind China. I would also like to understand by your statement that they are following one
Disc - I hold PVR
Hearing that government is pushing to discontinue double pricing for single product. Which effectively means PVR/INOX can’t charge exorbitant prices for coffee, coke, popcorn etc. Anyone else hearing that ?
Don’t know about that. But even if it is true, it only affects pepsi/coke. Pop corns, coffee, eatables are made in house. So they will not be affected.
A big positive is GST which will standardize the tax rate on ticket sales(at 18% or so). PVR has been paying whopping entertainment taxes on ticket sales in some states like Delhi etc ( 50% or so). This is a huge plus.
Disc: Invested
I donot think that government would let go this easy money so easily. Multiplexes would be a part of luxury item and would be charged at least 25% if not more.