Stock Market Result Update on PVR for 1QFY2012

Stock Market Result Update on PVR for 1QFY2012 with a Neutral recommendation.

PVR reported impressive performance in 1QFY2012 on all fronts. The company’s revenue grew by ~14% yoy, as 1QFY2012 witnessed higher occupancy after a muted quarter marked by IPL. Also, good performance by movies such as Ready, Pyaar Ka Panchnama, Double Dhamaal and Hangover II along with the increase in average ticket price (ATP) led to strong top-line growth.

Key highlights of the quarter: Occupancy increased to 29% in 1QFY2012 from 20% in 4QFY2011. ATP increased by ~3% yoy during the quarter to `162. Footfalls increased to 5.5mn in 1QFY2012 from 5.1mn in 1QFY2011. Despite a 250bp yoy operating margin expansion, recurring earnings for the quarter came in at `2cr due to high depreciation and amortisation cost as the company amortised the costs for the movie 3 Thay Bhai.

Outlook and valuation: For FY2011–13E, we expect PVR to register a ~13% CAGR in its top line, aided by seat additions and higher contribution from bowling alleys. Earnings are expected to register a CAGR of 62% over the same period on account of low base (FY2011 earnings were affected due to a weak movie pipeline and 4QFY2011 being especially weak as it was a cricket heavy quarter) and margin contraction (due to high operating costs). Also, the company’s decision to concentrate on its core business will lead to improvement in earnings going forward. At the CMP of `119, the stock is trading at of 15.0x FY2013E EPS. We recommend a Neutral rating on the stock, as we see a limited upside in the stock at these levels.