ICICIdirect.com is bullish on PVR and has recommended buy rating on the stock with a target of Rs 780 in its August 4, 2014 research report.
"PVR has an impressive market share of ~25% (inclusive of Cinemax) of the total 1600 multiplex screens in the country. After the Cinemax acquisition, PVR has a combined revenue share of 20-22% (Bollywood) and 30-35% (Hollywood) of multiplex revenues. The company has about 445 screens as on date and plans to augment its market share by rolling out 70-80 screens each year. This leadership position gives PVR the leverage to negotiate better deals with movie producers. We expect the total screens at PVR to reach 110 properties with a total screen of 492 and 120 properties with total screens of 552 in FY15E and FY16E, respectively. PVR also plans to use this immense bargaining power to negotiate with the government so that there can be some minimum window before movie releases are available on other platforms."
"There has been massive consolidation in the sector with the acquisition of Cinemax by PVR and a recent acquisition of Satyam Cineplexes by Inox. Both PVR and Inox are emerging as two major players in the industry with PVR as the market leader. This consolidation will further help operators in taking price hikes. We expect PVR's ATPs to grow at 3.5% CAGR in FY14- 16E to reach Rs 176 by FY16E. Moreover, the company is refurbishing its offerings in the food and beverage segment, which has led to spend per head expansion to Rs 64 in the quarter. Going ahead, with the disposable income of the people increasing and improved quality of offerings by the company, the F&B spends are expected to rise to Rs 62 each by the end of FY15E and FY16E, respectively, from Rs 53 currently. PVR is strategising to augment its advertising revenues by about 25-30% on a YoY basis by providing the advertisers various deals such as pay per eyeballs and other innovative deals. The company has earned about Rs 141.9 crore in FY14. PVR has ~60 million footfalls, which provide advertisers with easily reachable audience and undivided attention. Hence, we have factored in a growth rate of 15% and 10% to reach Rs 163 crore and Rs 180 crore of ad revenues by FY15E and FY16E, respectively."
"We expect consolidated revenue and EBITDA growth of 15.7% and 21.4% CAGR, respectively, in FY14-16, led by ATP uptick and increased occupancies aided by the higher property roll-out. Moreover, a gradual recovery in the economic activity will increase the disposable income of the public and keep growth buoyant. We continue to maintain BUY valuing it at 11x EV/EBITDA and arrive at a target price of Rs 780," says ICICIdirect.com research report.
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