Revenues badly affected as theatres are closed – PVR

Update on the Indian Equity Market:
On Tuesday Nifty closed 0.05% higher at 11472. Among the sectoral indices, PSU Bank (+1.3%), Bank (+1.1%), and Financial Services (+0.9%) closed higher. Realty (-2.1%), Metal (-0.7%), and Pharma (-0.6%) sectors closed lower. Tata Motors (+5.3%), Bajaj Finance (+4.8%), and SBI (+3.4%) closed on a positive note. GAIL (-1.7%), NTPC (-1.5%), and Sun Pharma (-1.4%) were among the top losers.

Excerpts from an interview of Mr. Ajay Bijli, CMD, PVR with ET Now dated 24th August 2020:
• Revenues are badly affected as theatres are closed. Theatres were asked first to close down and now it will be one of the last few activities to be allowed to resume.

• Cinemas have closed down all over the world, but a lot of help was also given by the governments in various countries. But here in India the sector didn’t get any support.

• PVR is ready to resume its operations. The people of India have always loved to go out and watch films.

• Mr Bijli thinks five to six months of being deprived will not change people old habit of decade.

• In some malls of Delhi, footfall is already back to 90% of pre-covid level during weekends despite no cinema.
• OTT platform is a concern for PVR but in a country like India with 1500 films releasing, if 10-20 movies have gone in shutdown, it is fine.

• The company will focus on 3 buckets – rescue, revival and reinvention.

• As a rescue plan, PVR did rights issue. The company will focus on cost cutting and manage developer related issues. Revival will happen when the government gives permission to open and with new SOPs being ready comes reinvention mode.

• Survey suggest that youngsters are eager to come back.

• The company will continue with expansion. If there was no shut down, PVR would have done 100 screens last fiscal, but finished with 88 the company got licenses for the rest of the 12. Once the restrictions are lifted there will be opening of 15-20 new screens.

• The Mumbai drive in theater was on cards from a long period of time, the core business is cinemas and drive in model is yet to be tested.

Consensus Estimate: (Source: market screener website)
• The closing price of PVR was ₹ 1,324/- as of 25-August-2020. It traded at NM/ 38x/28x the consensus Earnings per share estimate of ₹ -80.9/35.3/47.5 for FY21E/ FY22E/FY23E respectively. (NM- Not Meaningful)
• The consensus average target price for PVR is ₹ 1,314/- which implies a PE multiple of 28x on FY23E EPS of ₹ 47.5/-
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