Emkay Global
PVR (Hold)
Target: ₹1,430
CMP: ₹1,498.60
PVR posted an EBITDA loss of ₹78.10 crore, restricted by common area maintenance (CAM) charges. Rent negotiations for 88 per cent of cinemas have culminated while discussions for 13 properties and 56 screens are under way. Gross debt rose to ₹1,500 crore from ₹1,280 crore in Q2.
The strong show of regional movies should provide the much-needed impetus for Bollywood producers to start releasing films in Q4. The management is hopeful of government’s permission for higher occupancy and for financial relief. Potential equity capital raise (up to ₹800 crore) will be used for deleveraging, preparing for any unexpected rise in cash burn and any inorganic opportunities.
We reiterate our positive stance on the medium-term prospects of multiplexes as a whole, given the limited availability of out-of-home entertainment activities in India. In addition, the poor financial health of smaller/regional multiplex chains could provide inorganic opportunities, leading to further consolidation in the industry and sustained premium valuations. Key risks: Better-than-estimated footfalls; significant rise in Covid-19 cases leading to another lockdown for public places; adverse outcome on incremental rental agreements; lack of quality content; and weaker-than-expected recovery in ad revenues.
We maintain ‘Hold’ with a revised target price of ₹1,430 (₹1,220 earlier).