>PVR LIMITED (ICICI DIRECT)

Near term pain, long-term looks good...
PVR reported its Q4FY09 standalone results, which were below our expectations. The topline at Rs 58.0 crore was up 6.8% YoY while it declined by 21.5% QoQ. The EBITDA margin at 10.5% declined 248 bps and 526 bps YoY and QoQ, respectively, on the back of higher rental cost and
film distributors share. The company reported a net loss of Rs 1.11 crore vs. Rs 2.8 crore of PAT during Q4FY08.

Highlight of the quarter
PVR opened a 24-lane bowling alley centre at Ambience Mall, Gurgaon under its newly formed JV PVR Blu-O. During its 18 days of operation, the subsidiary grossed an income of Rs 0.7 crore and PAT of Rs - 0.4 crore.

Valuations
The whole of Q110E has been written off. This would result in negative growth in topline for FY10E. However, we expect the bottomline to grow on account of operational improvement in the subsidiaries and absence of one time launch cost incurred in them in FY09. At the CMP of Rs 129.3, PVR is trading at 27.0x its FY10E EPS of Rs 4.8 and 10.6x its FY11E EPS of Rs 12.2. On an EV/EBITDA basis, it is trading at 7.1x and 4.7x its FY10E and FY11E EBITDA, respectively. We value the company at 7x FY10E EBITDA to arrive at a target price of Rs 127.3, implying a 1.5% downside. We are upgrading the stock from UNDERPERFORMER to HOLD.

Result Analysis

Lack of good quality content
The entire multiplex industry witnessed lower occupancy levels due to lack of good quality content and the examination season. Generally, Q4 remains subdued due to the examination season. However, during Q4FY09 the exhibition business took a further hit due to the inferior quality content that was released. Big-ticket movies like Delhi 6, Chandni Chowk to China and Billu underperformed at the box office. Top five films in Q409 had a net collection of Rs 94.0 crore at the box office as compared to Rs 145.6 crore in Q408.

Consolidated result analysis
On a consolidated basis, the company reported topline of Rs 355.39 crore and EBITDA of Rs 50 crore. The EBITDA margin stood at 14.2% as against 16.8% on a standalone basis. During the year, PVR formed three new subsidiaries PVR Pictures, Sunrise Infotainment Ltd and CR Retail. The company entered into a 51:49 JV with Thailand-based Major Cineplex group Plc for PVR Blu-O. These collectively contributed ~Rs 117.66 crore to the topline. However, on the EBITDA front, the consolidated contribution from these subsidiaries was negative.

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