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Pyramid Saimira Theatre Q1 Results update

Pyramid Saimira Theatre Ltd. (PSTL) reported a higher standalone topline q-o-q, mainly because of higher food & beverage (F&B) revenues.

Mainstay exhibition revenues showed a marginal de-growth mainly due to lower-than-normal average occupancy (for the holiday season) because of factors like impact of IPL 20-20 cricket tournament and lack of blockbuster movie releases during the quarter. However, cost pressures have continued to erode the EBITDA margin. Also interest cost has come into play during the last two quarters, while depreciation has increased substantially, pulling profits down even further.

In view of the pressure on EBITDA margin and consequent drop in earnings of the mainstay exhibition business, we cut our revenue and earnings estimates, which translate into a valuation of 7.2xFY09E and 5.9xFY10E on a stand-alone basis. On a consolidated basis, the valuation is far more attractive, at 4.7xFY09E and 3.9xFY10E.

We however remain bullish on the potential of the production and distribution subsidiaries and note the possibilities of a substantial earnings upside in both, in which case our earnings and price targets may be revised accordingly.

We cut our 18-month target price to Rs285, which would translate into returns of 77% on the current price. We therefore maintain our Buy call on the stock.