Accumulate PVR; target of Rs 1435: Prabhudas Lilladher

Prabhudas Lilladher's research report on PVR

PVR’s Ind-AS adjusted EBITDA loss of Rs1,159mn was better than our estimates of Rs1,344mn as rigorous cost cutting initiatives resulted in average fixed opex burn of ~Rs320mn per month in 1QFY21 against a guidance of Rs400-450mn given at the start of the lockdown. Further, management guided for a lower burn rate of Rs220-250mn per month in 2QFY21. With reopening timelines being highly uncertain and rising instances of producers opting for the OTT route, we expect FY21E to be highly unpredictable and a complete wash out. However, we expect normalcy to return by FY22E (escapism will become even more relevant post-COVID) as many production houses have resumed shooting post relaxation in lockdown guidelines.

Outlook

We continue to maintain our positive stance on the multiplex space and retain our ACCUMULATE rating on PVR by raising our target EV/EBITDA multiple to 12x (earlier 10x; LPA is 12x) as 1) recent rights issue of Rs3bn evades near term liquidity concerns and 2) reduction in fixed opex burn to Rs220-250mn per month indicates that cash drain will be lower till the time multiplexes are shut. Further, Tenet’s collection of US$200mn so far and PVR Lanka’s SPH/ATP ratio of 60% odd does not indicate any structural behavioral changes in content or F&B consumption pattern, reducing the skepticism on valuation. Maintain ACCUMULATE, with a revised TP of Rs1,435.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More