Tuesday, September 21, 2010


Screen additions/movie pipeline to drive exhibition business: Management has
guided for a robust 2Q/3QFY2011 for the exhibition business, aided by strong
movie pipeline (both domestic and Hollywood), and substantial screen additions
(PVR has added 28 screens and ~7,500 seats over the last six months).
Management expects a pipeline of almost 14-15 3D English movies (most of
them being sequels) to be released over the next 18-24 months, and contributing
~27-28% to top-line.

Phoenix Mill offers considerable value unlocking, not factored in our numbers:
PVR is looking at sale and lease back of its property at Phoenix Mills. It is positive
of closing the deal by end of FY2011. The company expects the deal to rake in
~Rs80-100cr cash, which will help fund its future capex needs. It will also boost
the company’s RoCE though we have not factored in the same.

Multi-fold growth for PVR Pictures in FY2011E: PVR Pictures released Aisha, which
is estimated to have contributed net revenue of ~Rs20cr. Two more productions
are lined up in FY2011. The company has also bagged the pan-India distribution
rights for Action Replayy, which will be a Diwali release.

Blu-O a profit making venture from first year: Blu-O is expected to add a 26-lane
bowling alley by 4QFY2011, in Vasant Kunj, Delhi. The company is targeting a
total of 150 lanes by FY2012 and expects it to be ~Rs80-90cr business.

Outlook and Valuation: For FY2010-12E, we expect PVR to register 44% CAGR in
consolidated top-line, aided by 34% CAGR in exhibition revenues, 120% CAGR in
PVR Pictures and 80% CAGR in Blu-O. We estimate earnings to register strong
CAGR of 436% over the period on a low base and margin expansion (on a low
base, we expect OPM of 16-17% in FY2011-12E). At the CMP of Rs174, the stock
is trading at attractive valuations of 11.5x FY2012E EPS. We maintain a Buy on
the stock with a revised Target Price of Rs226 (Rs199) based on 15x FY2012E EPS
of Rs15.1. Upside risk to our estimates include significant value unlocking in case
the sale and lease agreement for the Phoenix Mill property goes through.

To read the full report: PVR