**PVR Ltd.
CMP- Rs.396…P/E: 19.
MCap: 1620 cr.
Quoting SRK “When you are going through a(bad)phase in the economy,the only vent you have is participating in some unwinding activity.I think entertainment provides that.It could be Televison or Sports or Movies or just dressing up- you feel good about yourself.I think entertainment is like lipstick,it makes people feel good about themselves.I think movies are the greatest escape & I feel its alright to escape for a while.Different people different preferences & movies are the most effective means.”
Of late,movies have done scorching business-Yeh Jawaani Hai Deewani,Chennai Express.I gather Madras Cafe is also doing well.Many big-ticket releases are also lined up- Dhoom 3,Krrish 3,Grand Masti,Besharam,etc.Anyways,its a proven fact that movies do great biz in recessionary/bad times.
No. of films in 2009: 90…Box Office collections(revenues): 1797 cr.
No. of films in 2008: 87…Box Office collections(revenues): 1830 cr.
Talking about the company,PVR is the largest listed player in the segment.Managed by the Bijli family,the company started in 1992.With the Cinemax acquisition,the co. has widened its reach by a good deal(we all know that) There is little competition in the multiplex segment for PVR,so the risk of Market Share loss is low.Presently the market share is around 25%.The Indian film industry is projected to grow at a CAGR of 10.5% to INR 150 billion by 2016.The screens are slated to reach 2200+ by 2016.
The sales CAGR of the co. has been a robust 30%+ in the past 3 years(all without ‘bad’ times) The Net profits too have recorded a scorching growth of 60%+.The penetration of multiplexes is increasing,PVR too is on the train.PVR presently has 385 screens in 90 locations & 37 cities.They plan to take the no. of screens to 437 by 2014 & 500 by 2015.PVR has a strong presence in Delhi,NCR,Mumbai,Chennai,Hyderabad,Bangalore.They own the largest multiplex in India,located in Chandigarh,with 11 screens.They opened India’s first2K Dolby Digital Multiplex & have an expanding chain of premium screens(PVR Premiere)The co. is opening their first multiplex here soon,in Dehradun.So,they are also looking to expand reach in Tier II/Tier III cities.**
**Basically,I feel the company is like a quasi-consumption play and it doesn’t need much head scratching to figure out the potential of the industry(which has been a very consistent sector in the past too) The increasing transparency in Ticket sales is an added positive.
Indian movies have started to gain much higher sales abroad: US,UK,Russia are key markets(Asian ones too) I believe the co. will expand abroad too.The company recently entered into a 5-year ‘strategic partnership’ with BookMyshow.com.
The company reported a negative cash flow for FY2013.Largely owing to the Cinemax acquisition.Though the expansions(cost=150 cr. for 75 screens,slated by 2014)may put a stress,I feel they should report positive cash flows for FY2014.
RISKS:
The stock has more than doubled in the past 1 year.Good performance over a 2 year period as well.
Content based industry.Implying that poor content can have an adverse impact(the management has no control over this content)
Big brands flocking to the industry in the future may dilute the growth rate.
Take two:
All in all,I feel the stock provides an excellent hedge in these markets.At a time when markets are expected to go much deeper,even ValuePickr picks shall bear the brunt.No doubt,we would like to buy them then.So,why not swap 'em with PVR for the time being.The stock has seen some very good accumulation in the past few days/weeks.It touched a new high today itself.The management is efficient & is constantly on the lookout for opportunities.The dividend yield too is decent at 1.5%.
Though I feel there is enough,I apologise beforehand for the things I missed.
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