PVR Shares Complete Fundamental Analysis and Future Outlook
PVR Ltd. is the largest film exhibition company in India. They established the first multiplex cinema in 1997 in New Delhi and currently operates a total of 821 Screens. They have 172 Properties across 70 Cities (India and Sri Lanka), serving a total 100 million audience annually.
- The company’s shares have 52 weeks high of INR 2125 and have a current market capitalization of INR 53 billion which makes it a Mid-cap company.
- PVR is also the industry leader in terms of a number of screens, admits and operating revenues in India and is placed amongst the top 10 global multiplex players in terms of ticket sales.
- The company has a solid presence across all metros and semi-urban regions in India. With the increasing disposable income in the economy along with the decreasing saving rate, the Indian entertainment industry is expected to grow in double digits.
- The company has a market share of around 25% in the Bollywood segment and 30% in the Hollywood (including Hollywood dubbed) segment in India. PVR also has the highest average ticket price and spend per head amongst the top 4 multiplex players in India.
- The company also has the highest share of advertising income to total operating income among its peers including INOX and Carnival Cinemas.
- The company is also focused on inorganic growth and it acquired Cinemax in 2012 and SPI Cinemas in 2018. Overall the company has a good competitive advantage over others especially due to its wide presence in the Indian market.
I have evaluated the company on 10 fundamental categories and each has been given a rating out of 5 stars. From this, I have arrived at a combined stock rating for the company.
This is the summary of the analysis. You can read the detailed analysis with the excel models on my blog (Check the source link)
Source: PVR Shares Fundamental Analysis and Future Outlook
Some insights for the coming years from management discussion & analysis (MD&A) and con calls are as follows.
- The COVID-19 lockdown is going to have a negative impact on the entertainment industry in India. The theatres are expected to lose revenue over the entire FY 2020 due to social distancing and government precautions. The revenue impact will be in double digits and can even be greater than 50%. The stock price will see correction temporarily.
- PVR has a pipeline of adding 90–100 screens in FY 2020. For FY 2021 the guidance is in the range of 75–100 screens. This can be delayed due to the lockdown.
- Gross margin should remain in the range of 100 basis points from the current level, not much improvement is expected. Employee cost, rents and other miscellaneous expense should grow between 5–10%, but revenue growth should outpace expense growth once the temporary setback due to COVID-19 clears.
- Last year Hollywood and Bollywood movies performed well, but regional movies showed a decline, affecting the overall growth. This is expected to recover in the future and regional movies will drive growth especially in non-metro regions.
- Contribution of off-screen advertisement revenue lies in the range of 10%-15% and is expected to remain constant.
The company shows promising growth opportunities driven by macro factors like increasing income levels, especially in urban areas. The ticket sales will see a short term decline due to the lockdown but it is only temporary. In the long run, the company has high growth prospects and good profitability. Therefore it seems to be a good investment for the long term.
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