PVR 3QFY2014 performance highlights and results update
February 4, 2014, Tuesday, 05:22 GMT | 00:22 EST | 09:52 IST | 12:22 SGT
For 3QFY2014, PVR’s top-line and bottom-line performance was below our expectations as well as street estimates. Although the top-line grew by 68.3% yoy to Rs.336cr (mainly on account of consolidation of Cinemax), it was 8.7% below our estimate of Rs.368cr. The underperformance in the top-line was due to only 3 hit films in the quarter which led to decline in footfalls for comparable properties. Consequently, the EBITDA margin contracted by 274bp yoy to 14.2% and profit grew by 56.5% yoy to Rs.14cr (below our estimate of Rs.23cr). Cinemax’s financials have been consolidated; hence the numbers are not comparable yoy.
Operational performance: PVR reported a 14.9% yoy decline in footfalls to 7.4mn for comparable properties on a standalone basis due to only 3 big hits (Ram Leela, Krrish 3 and Dhoom 3) in the quarter compared to 7 big hits in 3QFY2013. Moreover, many big movies such as R Rajkumar, Besharam, Boss and Bullet Raja underperformed expectations at the box office. However, ticket sales grew by 12.6% yoy to Rs.136cr due to 5.8% yoy growth in average ticket price (ATP) to Rs.183. For Cinemax, ticket sales declined by 23.0% yoy to Rs.61cr for comparable properties, mainly on back of a 22% yoy decline in footfalls to 4.6mn and flat yoy growth in average ticket price (ATP) to Rs.162.
Strong organic expansion set to continue: PVR has already added 56 screens in 9MFY2014 itself and plans to add another 24 screens in 4QFY2014. The robust organic expansion is set to continue with the company planning to add another 50-70 screens by end of FY2015, taking the total tally of screens near 500 by end of FY2015.
Outlook and valuation: PVR is expected to register robust revenues on incremental earnings from its newly opened properties, cost savings due to synergies from Cinemax’s acquisition and an impressive movie pipeline. However, high debt remains a key concern. At the current market price, the stock is trading at 22.0x FY2015E EPS. We believe the stock offers limited upside from the current market price. Hence, we recommend a Neutral view on the stock.