1. Healthcare

INSTITUTIONAL SECURITIES
PVR
Earnings beat led by tight cost control
OUTPERFORMER
30 January 2015
Q3FY15 result highlights
BSE Sensex: 29183
™
Revenue of Rs4.2bn (+24.6% yoy) was in line, but EBITDA of Rs831m (+69%
yoy) was 7% higher than estimates on lower than expected electricity, common
area maintenance and repair costs. The management had guided for savings in
these cost items, but we are surprised by the quantum.
™
Margin expanded by 520bp yoy to 19.8%, led by strong revenue growth.
™
PAT came in 21% above expectation on higher EBITDA and lower tax rate of
1%, versus our expectation of 5%.
™
Overall footfalls grew by 12% yoy to 16m on the back of better content than in
the base quarter; comparable properties’ footfalls grew by 3% yoy.
™
ATP increased by 5% yoy to Rs184; spend per head on F&B posted strong
growth of 23% yoy to Rs67 (both ATP and SPH were in line)
™
Advertising revenue posted strong growth of 28% yoy growth.
Sector: Media
Stock data
CMP (Rs)
680
Mkt Cap (Rsbn/US$m)
28.2 / 455.3
Target Price (Rs)
789
Change in TP (%)
Ù
Potential from CMP (%)
+16.0
Earnings change (%)
Ù
Ù
Ù
FY15E
FY16E
FY17E
Bloomberg code
PVRL IN
1-yr high/low (Rs)
751/465
6-mth avg. daily volumes (m)
0.1
6-mth avg. daily traded value
(Rsm /US$m)
68.2 / 1.1
Shares outstanding (m)
Free float (%)
Promoter holding (%)
41.4
70.4
29.6
Price performance – relative and absolute
PVR
Key positives: 10% qoq saving in electricity, repair and common area maintenance
costs; strong 28% yoy growth in advertising revenue.
Key negatives: NA.
Impact on financials: No changes.
Valuations & view
With over 35% of revenues being driven by advertising and F&B, PVR’s
dependence on the content pipeline is high given that it is content that attracts
footfalls, which drives higher F&B. Valuations of 30x FY16E EPS might appear rich
for this cyclical business; however, GST implementation will be a big trigger (could
potentially lead to earnings upgrade of 30-50%). Maintain Outperformer. The key
risks to our call are delayed implementation of GST and poor content pipeline.
Key financials (quarterly)
(Rs mn)
Sensex
600
Net Sales
Q3FY14
Q2FY15
Q3FY15
% ch qoq
% ch yoy
% var from est
3,373
4,002
4,203
5.0
24.6
0.2
7.5
450
EBIDTA
493
586
831
41.8
68.6
300
OPM (%)
EBIT
14.6
305
14.7
282
19.8
517
5.1
83.5
5.2
69.4
11.4
(207)
(201)
(198)
n/a
n/a
(1.3)
PBT
99
81
319
293.0
223.6
21.1
PAT
142
92
316
242.9
122.8
21.0
Adjusted PAT
142
92
316
242.9
122.8
21.0
Adj PAT Margin (%)
EPS (Rs)
4.2
3.6
2.3
2.2
7.5
7.6
5.2
241.3
3.3
113.7
20.4
150
0
Jan-12
Interest
Oct-12
(%)
PVR
BSE Sensex
Jul-13
Apr-14
Jan-15
3-mth
6-mth
1-yr
(4.8)
6.7
9.3
11.9
13.1
42.4
Rohit Dokania
[email protected]
91-22-6622 2567
For Private Circulation only.
Important disclosures appear at the back of this report”
SEBI Registration Nos.: INB23 12914 37, INF23 12914 37, INB01 12914 33, INF01 12914 33.
RESULT NOTE
INDIA RESEARCH
PVR – Q3FY15 result
A snapshot of Q3FY15 results
Q2FY14 Q3FY14 Q4FY14 Q1FY15 Q2FY15
Total revenues
3,658
3,373
3,142
3,623
4,002
Q3FY15
4,203
Comments
Strong revenue growth on healthy content
pipeline in this quarter versus the base
yoy change (%)
COGS
Employee costs
Other expenditure
90.5
(1,175)
66.6
(1,052)
28.6
(903)
8.1
(1,151)
9.4
(1,219)
24.6
(1,285)
(316)
(326)
(287)
(341)
(362)
(370)
(1,420)
(1,502)
(1,622)
(1,583)
(1,835)
(1,717)
10% qoq saving in electricity, repair and
common area maintenance expenses
despite flat footfalls sequentially
Total expenditure
(2,910)
(2,880)
(2,812)
(3,075)
(3,416)
(3,372)
EBITDA
748
493
331
547
586
831
OPM (%)
20.4
14.6
10.5
15.1
14.7
19.8
Operating leverage helped improve
margins strongly
Depreciation
(209)
(209)
(244)
(291)
(311)
13
21
21
12
6
9
(210)
(207)
(184)
(192)
(201)
(198)
PBT
342
99
(76)
75
81
319
Exceptional item
(23)
0
85
0
0
0
Tax
(42)
41
40
(1)
0
(3)
PAT
277
139
49
75
81
316
Other income
Interest
Share of associates/minority interest (1)
Reported PAT
276
(323)
3
59
2
11
(0)
142
107
77
92
316
Adjusted PAT
298
142
22
77
92
316
yoy change (%)
Source: Company
85.5
55.1
(82.8)
(56.7)
(69.2)
122.8
Tax rate at just 1% of PBT
Strong growth in PAT
‰ Other highlights
Healthy content pipeline: In October content was good (‘Happy New Year’ and ‘Bang Bang’), November was poor
while December second half was great on the back of ‘PK’ movie.
Exhibition business highlights: Revenue grew by 24% yoy to Rs3.98bn with EBITDA of Rs780m (+65% yoy), margin
improved by 490bp to 19.6%.
Movie distribution segment: Revenue of Rs119m up 74% yoy with EBIT breakeven.
New screen addition: Opened 9 screens in this quarter and has revised its screen addition guidance to 62 in this fiscal
(guidance given in Q2FY15 was 70 screens and in Q1FY15 66 screens). It has opened 41 screens to date this fiscal.
To buy out stake of L Capital in PVR Leisure: PVR Leisure is PVR’s 54% subsidiary which operates its bowling alley
and restaurant businesses. PVR is directing all its energies on the exhibition business and hence will go slow on nonexhibition expansion. Thus L Capital is exiting this business and PVR is buying out its stake in PVR Leisure for
Rs370m. L Capital had invested Rs500m for its stake in PVR Leisure.
Fund-raising plans: In Q1FY15 PVR had taken board approval for a QIP of up to Rs5bn and in Q2FY15 its board has
approved an NCD up to Rs5bn. The management is confident is meeting its organic growth plans through internal
accruals; however, if it consummates a large transaction then it might have to raise external funds (debt or equity not
decided)
GST a big trigger: If the GST rate is fixed at 16%, it could potentially lead to a 450-550bp improvement in EBITDA
margin for PVR. Given the fact that movie watching is a discretionary spend and the category has pricing power, we
expect PVR to absorb all benefits of GST rather than passing it on to consumers.
2 | IDFC SECURITIES
30 January 2015
PVR – Q3FY15 result
Income statement
Key ratios
Year to 31 Mar (Rs m)
FY13
FY14
FY15E
FY16E
FY17E
Year to 31 Mar
Net sales
8,097
13,512
15,860
19,616
22,614
EBITDA margin (%)
% growth
56.4
66.9
17.4
23.7
15.3
Operating expenses
6,885
11,358
13,501
16,459
18,912
EBITDA
1,212
2,154
2,359
3,157
3,702
59.3
77.7
9.5
33.8
17.3
47
76
49
52
57
(368)
(795)
(793)
(716)
(647)
Depreciation
560
944
1,242
1,449
1,573
Pre-tax profit
332
491
372
1,045
1,539
Deferred tax
(115)
-
-
-
-
% change
Other income
Net interest
Current tax
(9)
Profit after tax
19
456
Minorities
472
2
Non-recurring items
18
354
57
(13)
35
32
-
145
900
39
-
433
1,106
(25)
-
Net profit after
non-recurring items
445
% change
561
76.5
389
25.9
(30.6)
938
141.3
1,082
15.3
As on 31 Mar (Rs m)
FY13
Paid-up capital
FY14 FY15E
FY16E
FY17E
396
411
411
411
411
Reserves & surplus
6,031
3,582
3,971
4,909
5,991
Total shareholders' equity
7,282
4,764
5,307
6,338
7,521
Total current liabilities
1,813
1,361
1,597
1,857
2,143
Total debt
6,566
7,134
7,134
7,134
7,134
Deferred tax liabilities
Other non-current liabilities
Total equity & liabilities
Net fixed assets
7
4
4
4
4
201
270
312
361
418
8,586
8,769
9,047
9,356
9,699
15,868
13,533
14,354
15,694
17,220
7,163
7,797
8,343
8,469
8,434
Investments
16
12
12
12
12
Total current assets
3,821
4,050
4,336
5,527
7,063
Deferred tax assets
16
-
-
-
-
4,852
1,674
1,664
1,686
1,712
Other non-current assets
Working capital
Total assets
2,008
2,689
2,738
3,670
4,920
15,868
13,533
14,354
15,694
17,220
Cash flow
Year to 31 Mar (Rs m)
FY13
FY14
FY15E
FY16E
332
491
372
1,045
1,539
Depreciation
560
944
1,242
1,449
1,573
(402)
(985)
(168)
(336)
(396)
(433)
Total tax paid
9
(19)
(18)
(145)
189
101
42
49
57
Operating cash Inflow
687
531
1,470
2,062
2,340
Capital expenditure
(8,564)
1,668
(1,757)
(1,575)
(1,538)
Free cash flow (a+b)
(7,876)
2,200
(287)
488
802
(10)
4
-
-
-
Debt raised/(repaid)
4,533
568
-
-
-
Capital raised/(repaid)
3,232
(3,637)
-
-
-
(46)
(48)
(48)
(48)
(48)
Dividend (incl. tax)
Misc
689
677
237
179
125
Net chg in cash
521
(236)
(97)
619
879
3 | IDFC SECURITIES
14.9
16.1
EBIT margin (%)
8.1
9.0
7.0
8.7
16.4
9.4
PAT margin (%)
5.7
3.9
2.5
4.8
4.8
RoE (%)
8.9
8.8
7.7
16.1
15.6
RoCE (%)
6.7
9.2
9.0
12.8
14.7
Gearing (x)
0.8
1.4
1.3
1.0
0.7
FY14 FY15E FY16E
FY17E
Key valuation metrics
Year to 31 Mar
FY13
Reported EPS (Rs)
11.2
13.6
9.5
22.8
26.3
Adj. EPS (Rs)
11.5
12.9
9.5
22.8
26.3
PE (x)
58.9
52.9
71.9
29.8
25.9
Price/ Book (x)
3.7
5.9
5.3
4.4
3.7
EV/ Net sales (x)
4.2
2.6
2.2
1.8
1.5
EV/ EBITDA (x)
27.7
16.4
15.1
11.1
9.3
2.4
2.9
2.8
2.5
2.3
EV/ CE (x)
(%)
RoCE
RoE
20.0
15.0
10.0
5.0
0.0
FY12
FY13
FY14
FY15E
FY16E
FY17E
Shareholding pattern
Public &
Others
6.5%
Foreign
55.4%
FY17E
Ext ord. Items & others
Chg in investments
FY17E
15.9
Promoters
29.6%
Pre-tax profit
Chg in Working capital
FY14 FY15E FY16E
15.0
Improving RoE
Balance sheet
Total liabilities
FY13
Nonpromoter
corporate
holding
3.9%
Institutions
4.7%
As of December 2014
30 January 2015
PVR – Q3FY15 result
Disclaimer
This document has been prepared by IDFC Securities Ltd (IDFC SEC). IDFC SEC is a full-service, integrated investment banking, and institutional broking group. There are
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Unless specifically mentioned in Point No. 9 below:
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(ies) covered in this report as of the end of the month immediately preceding the distribution of the research report.
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4. The Research Analyst, IDFC SEC and its associates have not received compensation for investment banking or merchant banking or brokerage services or for any other
products or services from the company(ies) covered in this report, in the past twelve months.
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company (ies) covered in this report.
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research report.
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9. Details IDFC SEC , Research Analyst and its associates pertaining to the companies covered in the Research report:
Sr. No.
1.
2.
3.
4.
5.
Particulars
Yes / No.
Whether compensation has been received from the company(ies) covered in the Research report in the past 12 months for investment
banking transaction by IDFC SEC
Whether Research Analyst, IDFC SEC or its associates or relatives of the Research Analyst affiliates collectively hold more than 1% of the
company(ies) covered in the Research report
No.
No
Whether compensation has been received by IDFC SEC or its associates from the company(ies) covered in the Research report
No
IDFC SEC or its affiliates have managed or co-managed in the previous twelve months a private or public offering of securities for the
company(ies) covered in the Research report
Research Analyst, his associate, IDFC SEC or its associates have received compensation for investment banking or merchant banking or
brokerage services or for any other products or services from the the company(ies) covered in the Research report, in the last twelve months
No
No
Explanation of Ratings:
1. Outperformer
2. Neutral
3. Underperformer
:
:
:
More than 5% to Index
Within 0-5% (upside or downside) to Index
Less than 5% to Index
Copyright in this document vests exclusively with IDFC Securities Ltd.
4 | IDFC SECURITIES
30 January 2015
PVR – Q3FY15 result
Annexure
Associates of IDFC Securities Limited
Sr.
No.
Name of Company
Category
Non Banking Finance Company,
SEBI registered Merchant Banker, SEBI registered
Debenture Trustee
1.
IDFC Ltd.
2.
IDFC Capital (USA) INC.
Subsidiary
3.
IDFC Capital (Singapore) Pte. Ltd.
Subsidiary
Fund Manager
4.
IDFC Securities Singapore Pte. Ltd.
Subsidiary
Dealing in Securities
5.
IDFC Fund of Funds Limited
Subsidiary
Sponsor Investments
5 | IDFC SECURITIES
Parent
Nature of business
Broker Dealer registered with FINRA
30 January 2015
PVR – Q3FY15 result
www.idfc.com
Analyst
Sector/Industry/Coverage
E-mail
Anish Damania
Shirish Rane
Co-CEO - IDFC Securities, Head - Institutional Equities; Strategy
Head of Research; Construction, Power
[email protected]
[email protected]
Tel.+91-22-6622 2600
Prakash Joshi
Oil & Gas, Metals, Mining
[email protected]
91-22-662 22564
Nitin Agarwal
Pharmaceuticals, Real Estate, Agri-inputs
[email protected]
91-22-662 22568
91-22-6622 2522
91-22-662 22575
Hitesh Shah
IT Services & Telecom
[email protected]
91-22-662 22565
Manish Chowdhary
Financials
[email protected]
91-22-662 22563
Bhoomika Nair
Engineering, Cement, Power Equipment, Logistics
[email protected]
91-22-662 22561
Ashish Shah
Construction, Power
[email protected]
91-22-662 22560
Deepak Jain
Vijayaraghavan G
Automobiles, Auto ancillaries
Midcaps
[email protected]
[email protected]
91-22-662 22562
91-22-662 22690
Rohit Dokania
Media & Entertainment
[email protected]
91-22-662 22567
Abhishek Gupta
Telecom, IT services
[email protected]
91-22-662 22661
Mohit Kumar, CFA
Construction, Power
[email protected]
91-22-662 22573
Param Desai
Pharmaceuticals, Real Estate, Agri-inputs
[email protected]
91-22-662 22579
Sameer Narang
Strategy, Economy
[email protected]
91-22-662 22566
Probal Sen
Oil & Gas
[email protected]
91-22-662 22569
Saumil Mehta
Metals, Mining
[email protected]
91-22-662 22578
Harit Kapoor
FMCG, Retail, Alcoholic Beverages
[email protected]
91-22-662 22649
Sameer Bhise
Financials
[email protected]
91-22-662 22635
Abhishek Ghosh
Engineering, Cement, Power Equipment, Logistics
[email protected]
91-22-662 22658
Saksham Kaushal
Automobiles, Auto ancillaries
[email protected]
91-22-662 22529
Dharmendra Sahu
Database Analyst
[email protected]
91-22-662 22580
Equity Sales/Dealing
Designation
E-mail
Tel.+91-22-6622 2500
Ashish Kalra
Managing Director, Sales
[email protected]
91-22-6622 2525
Rajesh Makharia
Director, Sales
[email protected]
91-22-6622 2528
Palak Shah
SVP, Sales
[email protected]
91-22-6622 2696
Varun Saboo
VP, Sales
[email protected]
91-22-6622 2558
Arati Mishra
VP, Sales
[email protected]
91-22-6622 2597
Hemal Ghia
VP, Sales
[email protected]
91-22-6622 2533
Tanvi Dixit
AVP, Sales
[email protected]
91-22-6622 2595
Nirav Bhatt
AVP, Sales
[email protected]
91-22-6622 2681
Chandan Asrani
Manager, Sales
[email protected]
91-22-6622 2540
Sneha Baxi
Manager, Sales
[email protected]
91-22-6622 2537
Suryakant Bhatt
Director & Head - Sales trading
[email protected]
91-22-6622 2693
Mukesh Chaturvedi
Director, Sales trading
[email protected]
91-22-6622 2512
Viren Sompura
SVP, Sales trading
[email protected]
91-22-6622 2527
Rajashekhar Hiremath
SVP, Sales trading
[email protected]
91-22-6622 2516
Alok Shyamsukha
VP, Sales trading
[email protected]
91-22-6622 2523
Suketu Parekh
VP, Sales trading
[email protected]
91-22-6622 2674
IDFC Securities
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Bandra (East), Mumbai 400 051
INDIA
IDFC Capital (USA) Inc,
Regus Business Centre
600 Third Avenue,
2nd Floor,
New York,10016
Tel: +91 22 6622 2600
Tel: +1 646 571 2303
Our research is also available on Bloomberg and Thomson Reuters
For any assistance in access, please contact [email protected]
6 | IDFC SECURITIES
30 January 2015