Entertainment

28 Mar

Merged entity plans to open 200 screens per year- PVR & Inox Leisure


Update on the Indian Equity Market:

On Monday, NIFTY settled at 17,222 (+0.4%) near the day’s high of 17,232. PSU BANK (+1.2%), OIL & GAS (+0.9%), and BANK (+0.8%) were the top sectoral gainers. CONSUMER DURABLES (-0.9%), HEALTHCARE INDEX (-0.5%), and IT (-0.4%) led the sectoral losers. Among the NIFTY50 components, BHARTIARTL (+4%), COALINDIA (+2.7%), and AXISBANK (+2%) led the gainers. UPL (-2%), SBILIFE (-2%), and NESTLEIND (-1.8%) led the losers.

Film exhibitors Inox Leisure and PVR have approved a plan of merger. the combined entity will be called PVR Inox. Mr. Ajay Bijli, CMD, PVR Ltd (PVR), and Mr. Siddharth Jain, Director, Inox Leisure Ltd (INOX) explained the merger rationale in an interview with Business Standard on 28th March 2022. here are the excerpts:

  • For regulatory approvals, they have to go through the whole process- the stock exchange, Securities and Exchange Board of India (SEBI), and National Company Law Tribunal (NCLAT). The companies have been told by councils that they don’t need a Competition Commission of India (CCI) approval.
  • India has 9,500 screens and is still growing. New players are coming in and old ones are expanding. PVR and INOX will have 1,500 combined screens. From a macro angle, content is getting consumed everywhere and not just in theatres as consumer behaviors have changed. INOX and PVR are only a subset of the whole revenue pie that gets created.
  • INOX and PVR have a symbiotic relationship with their film, producers, and distributors. They require more films because, as a result of the pandemic, the majority of them have moved to OTT platforms. INOX and PVR are looking at the overall pie of the gross box office collections of India that got severely impacted.
  • They expect the revenue pie to increase if they have more screens and the full support of their stakeholders. The film fraternity is an important stakeholder for PVR and INOX and they expect to play more cinemas in theatres. They don’t intend to spoil this equation by coming together and using their pricing power.
  • In the pre-pandemic era, both companies were adding about 60-80 screens per year. They plan to increase this number to 200 per year going forward.
  • India has 9,500 screens compared to 70,000 in China. As a country, India has been adding 400 screens a year as compared to 6,000-7,000 per year in China which shows how underpenetrated the market is in our country.
  • This partnership is expected to encourage the cinema exhibition industry to continue its investments. Content creators would get encouraged as the size of the industry grows.
  • The merger process is expected to take six to nine months.
  • Smaller towns have smaller malls and shopping centers coming in. A lot of single screens are converting into two and three plexes. INOX and PVR are not against growing in any format but they would be interested to seek any opportunity that comes up organically.

Asset Multiplier Comments

  • The film exhibition sector has been one of the worst impacted sectors due to the pandemic. This has led to a majority of the films getting released on OTT platforms. The sector is expected to go back to its pre-pandemic levels on the back of new film releases and the reopening of theatres.
  • We expect revenue and cost synergies to be created out of this merger. We believe the merged entity would have improved bargaining powers in terms of rentals and advertising rates charged due to an increase in market share.
  • We expect the merged entity to ramp up screen openings over the next few years and take advantage of the underpenetrated film exhibition market in India.

Consensus Estimate: (Source: market screener website)

  • The closing price of INOX was ₹ 525/- as of 28-March-2022. It traded at 40x/ 29x the consensus earnings estimate of ₹ 13/ 18/- per share for FY23E/FY24E respectively. The consensus target price of ₹ 500/- implies a P/E Multiple of 28x on the FY24E EPS estimate of ₹ 18/-
  • The closing price of PVR was ₹ 1,883/- as of 28-March-2022. It traded at 54x/ 30x the consensus earnings estimate of ₹ 35/ 63/- per share for FY23E/FY24E respectively. The consensus target price of ₹ 1,886/- implies a P/E Multiple of 30x on the FY24E EPS estimate of ₹ 63/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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19 Jan

Will turn EBITDA positive as new releases come – PVR

Update on the Indian Equity Market:

On Tuesday Nifty closed 1.7% higher at 14,521. Among the sectoral indices, Realty (+4.2%), Metal (+2.9%), and PSU Bank (+2.7%) closed higher. None of the sectors closed in the red. Bajaj Finserv (+6.7%), Bajaj Finance (+5.3%), and Tata Motors (+5.2%) closed on a positive note. ITC (-0.4%), Tech M (-0.3%), and Britannia (-0.1%) were among the top losers.

Excerpts from an interview of Mr. Nitin Sood, CFO, PVR with CNBC-TV18 dated 18th January 2021:

  • Speaking about footfalls, Sood said the company was given permission to open in October. While the theatres are open, there are no big releases resulting in lower footfalls.
  • The film ‘Master’ has done well for the company in the South and it gives hope of new content releasing soon.
  • On new content, he said the company is in talks with producers and the Bollywood community where big film releases have not been announced.
  • The industry is waiting for someone to take the first leap and with the movie ‘Master’ release, the release pipeline may get kicked off.
  • Speaking about earning trajectory, he said it is difficult to predict as it is dependent on the film release calendar. The company expects to turn EBITDA positive in the coming 2 to 3 months as more releases are planned.
  • The company has taken cost reduction measures during the nine months in which the business was completely shut.
  • The pre-COVID level of average break-even occupancies used to be between 23-25%, these numbers are now sub 20% led by the cost reduction initiatives taken by the company.
  • There are a lot of films pending to be released in 2021.
  • Speaking about fundraising, he says the company was sitting on the liquidity of Rs 370 crores and they have taken board approval to raise additional liquidity. This will help to keep the balance sheet strong and use to build a new screen portfolio.

 

 

Consensus Estimate: (Source: market screener and Investing.com websites)

  • The closing price of PVR was ₹ 1,526 as of 19-January-2021.  It traded at 64x/ 27x the consensus Earnings per share estimate of ₹ 23.9/56.5 for FY22E/ FY23E respectively.
  • The consensus average target price for PVR is ₹ 1567/- which implies a PE multiple of 28x on FY23E EPS of 56.5/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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18 Sep

Expects ALTBalaji to break even in Q4 – Balaji Telefilms

Update on the Indian Equity Market:

On Thursday, Nifty ended 0.7%, lower than the previous close at 11,519. The top gainers for Nifty 50 were Dr Reddy (+4.2%), HCL Tech (+2.3%), and Zee (+2.3%) while the losing stocks were Hindalco (-4.3%), Tata Motors (-2.5%), and Shree Cement (-2.4%). The sectoral gainers for the day were Pharma (+0.4%), Media (+0.4%), and IT (+0.2%) while the losers were Realty (-1.7%), Metal (-1.4%), and PSU Bank (-1.2%).

Edited excerpts of an interview with Mr Nachiket Pantvaidya, Group Chief Operating Officer at Balaji Telefilms and CEO ALTBalaji; dated 16th September 2020 from CNBC TV18:

• Proactive cost control measures implemented by Balaji Telefilms helped them stem their losses in the lockdown quarter. Their OTT platform, ALTBalaji remains one of the top 5 paid apps in the country.
• Pre COVID, the company was expecting ALTBalaji’s breakeven to happen in October, November and December this year, but as the production schedules were delayed because of the pandemic impact, now it is looking to breakeven in January, February and March in 2021.
• 1Q has been challenging for the Company as all content production activity came to stop.
• In terms of growth, the same quarter last financial year the Company had a direct revenue stream of 6.7 crores that has grown to 12 crores in this quarter so ALTBalaji is doubling its direct subscription.
• The Company is seeing a very good trajectory for ALTBalaji especially because tier II and tier III markets have opened up during the pandemic and that has got them a whole lot of new subscribers without having to spend a lot of marketing money to acquire.
• The acquisition pace will be very high because now the markets have opened up, according to Mr Pantvaidya.
• He added that the real question is that can the Company retain the acquired subscribers, will they churn out and the reason why he is putting that out-front is that if the Company has to produce new shows for these subscribers to be on the platform. Therefore the race is on for the Company to produce more and more shows.
• The Company is confident that it will launch close to 25 shows in the remaining part of the year starting this month itself which is probably 50% more than a usual clip.

Consensus Estimate: (Source: market screener website & investing.com)
• The closing price of Balaji Telefilms Ltd was ₹ 77/- as of 17-September-2020. The company reported a loss of Rs 5.8/- per share for FY20.
• The consensus target price of ₹ 100/-. The consensus earnings estimate are not available.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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11 Mar

Covid-19 advisories may impact footfall, but could be 30-60 day phenomenon: Ajay Bijli, PVR

Update on the Indian Equity Market:

On Monday, Indian shares followed a slide in global peers as fears over the spread of the Covid-19 outbreak intensified and oil prices plunged. The Nifty hit its lowest since February 2019 and the sell-off triggered by the economic fallout of the virus outbreak worsened by the turmoil at Yes Bank.

Among the Nifty 50 stocks, Yes Bank (+32.2%), BPCL (+5.5%), Infratel (+2.9%) and Eicher Motors (0.7%) were the only stocks which ended the day in the green. ONGC (-16.0%), Vedanta (-15.3%), and Reliance (-13.1%) were the top losers of the day. All the sectoral indices too ended in the red. Metal (-7.7%), Media (-6.7%), and PSU Bank (-6.1%) were the top losers.

Covid-19 advisories may impact footfall but could be 30-60 day phenomenon: Ajay Bijli, PVR

Excerpts from an interview with Mr. Ajay Bijli, Chairman and Managing Director, PVR Cinemas published in Mint dated 06th March 2020:

  • The release of the latest Bond film has been postponed. Talking about the US movie collections, he said that China, Japan, and South Korea are the big markets. India is a significant market, but not as big as these markets. So, he believes that the Indian film industry will not get impacted. Baaghi 3, which is a big franchise released on Friday. The advances are good so no delay in release was announced.
  • The Covid-19 advisory can impact footfall but it is an aberration because nobody has experienced anything like it. The safety, health, and security of the patrons are more important than the business. It is difficult to pinpoint if there has been an impact on the footfall because the content was not good in the past two weeks or is it the Covid-19. Mr. Bijli believes that this is a tide that will go away and the fundamentals of the business are very strong.
  • When asked about the pre-emptive action to combat the virus, he said that they have put sanitizers and disinfectants everywhere. PVR employees are wearing marks everywhere. They are ensuring the box office, and the seats are disinfected and cleaned thoroughly.
  • In terms of consumer spending outside the virus impact, PVR’s business has not been impacted. Before the virus issue, movies were releasing and people were coming out and watching movies, eating more.
  • Even the Q3 results were comparable to last year’s Q3. During recessionary times, people eliminate a lot of things from their discretionary spending. Since watching a movie is a small ticket item, and the content has been good, people are going out to watch a movie. Smaller films or sleeper hits as they are called, have done very well. He believes, it is a lifestyle need gap to go out and entertain oneself in India.
  • Studies show a positive correlation between OTT and cinema-going. He calls what is happening on Netflix and Amazon- long-form storytelling which is like Narcos -13 episodes, The Crown-26 episodes. The same people who consume long-form storytelling are going out and watching movies. People are consuming a lot of content but short-form storytelling is more experiential.

Consensus Estimate: (Source: market screener website)

  • The closing price of PVR Ltd was ₹ 1574/- as of 09-March-2020. It traded at 43x/ 31x/ 23x the consensus earnings estimate of ₹ 36.9/ 51.4/ 68.1 for FY20E/FY21E/FY22E respectively.
  • The consensus target price is ₹ 2060 /- which implies a PE multiple of 30x on FY22E EPS of ₹ 68.1/-.
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14 Feb

Shemaroo says economic slowdown impacted business from YouTube

Update on the Indian Equity Market:

On Thursday, NIFTY closed at 12,174 (-0.2%). NIFTY50 was led by Yes Bank (+6.4%), Dr Reddy (+3.6%), and Zee (+2.6%). IndusInd Bank (-3.6%), Tata Steel (-1.8%) and NTPC (-1.7%) were the top losers. Pharma (+0.9%), IT (+0.8%) and Media (+0.6%) were the top gaining sectors. PVT BANK (-1.4%), Bank (-0.8%) and Fin Service (-0.7%) were among the losing sectors.

Excerpts from an interview with Mr Hiren Gada, CEO and CFO of Shemaroo Entertainment aired on CNBCTV18 on 12th February 2020:

  • Mr Gada said that in the next 3-4 years the company is aiming for an equal split across its digital and traditional business. This year the Company is hoping to be about one-third and two-third between digital and traditional.
  • This year the core customer base on the traditional side which is the broadcasters, faced tremendous slowdown on the ad side as well as on the new tariff orders. The content investment has been low-key and that has affected the entire ecosystem according to Mr Gada.
  • The expenses on account of new initiatives have dragged the EBITDA margins down in FY20. They are looking at the margins in the line of approximately 25% from a regular operating business.
  • Mr Gada revealed that digital operations contribute 50% of Shemaroo’s revenues, but the overall economic slowdown in the country also impacted the company’s YouTube revenues.
  • He added that the slowdown has had an effect on the Company’s capital-raising plans.
  • The Company had envisaged the new investment capex for which they were looking to raise money but looking at the current market conditions and given where the current stock price is, the Company will relook at the whole investment project and plan differently in terms of how they are taking that going forward.

Consensus Estimate: (Source: market screener website)

  • The closing price of Shemaroo was ₹ 97/- as on 13-February-20. It traded at 3.3x/ 3.0x the consensus EPS estimate of ₹ 34.5/38.3 for FY20E/ FY21E respectively.
  • Consensus target price is ₹ 280/- which implies a PE multiple of 7.3x on FY21E EPS of ₹ 38.3/-
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11 Dec

Rs 600 Crore debt repayment in the next 6 months: Mr Anil Dua, Group CEO, Dish TV

Update on the Indian Equity Market:

On Tuesday, NIFTY50 closed 0.7% lower at 11,857. None of the sectors ended in green. The top losing sectors were Media (-1.9%), PSU Bank (-1.6%), Metal (-1.4%) and IT (-1.4%). The gainers among the stocks were Bajaj Finance (+1.3%), Hindustan Unilever (+1.1%), and Cipla (+1.1%). The top losers were Yes Bank (-10.4%), Zee Entertainment Enterprises (-5.1%), and GAIL (-4.4%).

Excerpts from an interview with Mr Anil Dua, Group CEO, Dish TV, published in Livemint dated 10th December 2019:

  • There has been a downgrade from CARE on the short-term bank facility due to a delay in a ₹250 crore short-term loan. This is a temporary downgrade, due to the bunching of some payments.
  • The company has paid ₹ 850 crores in the last eight months and will pay another ₹ 600 crore in the next six months. This repayment will include the ₹ 250 crore delayed payment.
  • Once the debt is less than ₹ 2,000 crore level, they will be comfortable as their Earnings before Interest, taxes, depreciation and amortisation (EBITDA) is more than ₹2,000 crores.
  • They plan to repay about ₹ 800 crores next year as well. This repayment will mostly be done by internal accruals. The company is hoping to get alternate credit facilities to finance their regular capex so that utilisation of cash flow can be normalised towards debt repayment.
  • Talking about the business environment in the new tariff regime, he said the transitional disruption has now settled down.
  • They hope to continue building on their subscriber base and investing into the future with new products such as their new android box.
  • With revenue of more than ₹ 6,000 crores and EBITDA of more than ₹ 2,000 crores, they expect an improvement in EBITDA margins as seen in the last quarter.
  • The Videocon merger has helped realise synergies in interest cost, power cost, logistics, transport and administration. They expect to realise more synergies in content cost, which has been impacted by the new tariff order.

Consensus Estimate (Source: market screener website)

  • The closing price of Dish TV India was ₹ 13/- as of 10-December-19. It traded at 21 x/8.7 x/ 5.4 x the consensus EPS of ₹ 0.6 /1.5 /2.4 for FY20E/FY21E/FY22E respectively.          
  • Consensus target price of ₹ 27.8/- implies a PE multiple of 12x on FY22E EPS of ₹ 2.6.
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02 Dec

ZEEL: ZEE5 targets to reach ~15mn daily active users in 6 months

Update on the Indian Equity Market: 

On Friday, NIFTY closed in the red at ~12,056 points (-0.8%) reversing the previous day gains. In the sector-wise performances, REALTY (+1.0%) was the best performing sector while Media (-2.5%) and Metal (-1.2%) was the worst-performing sector. Amongst the NIFTY 50 Stocks, INFRATEL (+6.7%), ADANI PORTS (+2.3%) were the top gainers while ZEEL (-7.9%) HINDUNILVR (-2.6%) were the worst performers.

ZEEL: ZEE5 targets to reach ~15mn daily active users in 6 months

Key takeaways from the interview of Mr Tarun Katial, CEO of Zee5, the online video streaming Over The Top (OTT) platform of Zee Entertainment Enterprises Ltd (ZEEL); dated 28th November 2019 on CNBC-TV18:

  • ZEE5 reached out to ~8.9 million daily active users, and over 80 million monthly actives and huge watch time. It targets to reach out to ~15 million daily active users in about ~6 months.
  • ZEE5 is offering 12 Indian languages today and five foreign languages. The company is looking to expand in Assamese, Malayalam, Kannada in the next six months.
  • It has a 3V strategy – Vernacular, Video and Voice. The User Interface (UI) and User Experience (UX) supports 12 languages. When the user opens the app, the first thing it asks is the language preference which reaches out to those many languages, both in display and content. ZEE5 gets the content through the web of Zee language channels. But building the UI in those many languages and navigating consumers in so many languages was critical. Indian keypads don’t support so many languages. A voice search is an important tool to let consumers discover the content quickly and easily.
  • ZEE5 also built a robust Advertising Video-on-Demand (AVoD) and Subscription Video-on-Demand (SVoD) strategy. The company made some very big investments on the AVoD side in building the ad suite. Ad tech (advertising technology) is run by big tech companies in India – Google Facebook and Twitter – and to compete in the ad space, ZEE5 needs to build its own ad suite.
  • ZEE5 is also building the self-serve bidding model where advertisers can book their own advertising slots, bid for advertising slots, the pricing is on a bidding model and optimises the advertisement themselves on an optimisation engine.
  • To reach out to more and more audience; ZEE5 needs to get hyper-personalised. It launched a new recommendation engine which between auto-curation and hyper-personalisation enabling it to offer a differentiated yet personalised service.
  • ZEE5 is investing in automation. It piloted with the tool from Microsoft Azure for self-editing.
  • Most of the app is fully curated through artificial intelligence and machine learning. ZEEL doesn’t do any manual curation anymore. ZEE5 is also evaluating a mobile-only plan, much like Netflix.
  • There is a significant growth month-on-month, both on the AVoD and SVoD side. ZEE5 is expected to break even within 5 years. 
  • According to Mr Katial, outside of (Amazon) Prime, Zee5 possibly has the largest subscription base in the country. ZEE5 is also looking to tie up with talks with other OTT platforms as well as good production houses.
  • ZEE5 is looking to capitalise on the content created by ZEEL over 27 years.
  • Brands are extremely important today in the day and age of social transparency. Mr Katial mentioned that ZEE5 has enough checks and balances to be able to deal with consumer complaints. It has a panel of people who look at all the complaints, a customer service team who gives feedback, who holds up the content team and make changes themselves.

Consensus Estimate (Source: market screener and investing.com website)

  • The closing price of ZEE was ₹ 286/- as of 29-November-19. It traded at 15x/13x/12x the consensus EPS estimate for FY20E/ FY21E/ FY22E of ₹ 19.7 / 22.3 / 24.3 respectively.
  • Consensus target price of ₹ 351/- implies a PE multiple of 14x on FY22E EPS of ₹ 24.3/- 
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01 Nov

PVR: QIP proceeds to be used for deleveraging and expansion

Update on the Indian Equity Market:

The BSE Sensex touched the all-time high of 40,344 Thursday before closing at 40,129. The volatility was fuelled by the monthly Futures and Options (F&O) expiry. The rally was seen in the global equity markets as the US Federal Reserve cut interest rate 25 bps as expected. The Sensex is up 12 out of the last 15 sessions with the total rally of more than 2,500 points. Foreign Institutional Investors (FII) bought equities of Rs100bn in this period. Among the sectoral indices, PSU BANK (3.8%), MEDIA (3.4%) and REALTY (1.2%) topped the chart while METAL (-0.5%), PVT BANK (-0.3%) and FIN SERVICES (-0.2%) were the losers. YESBANK (23.8%), ZEEL (10.8%) and SBIN (7.8%) led the index higher whereas JSWSTEEL (-2.9%), IOC (-2.1%) and TATASTEEL (-2.1%) were the laggards.

PVR: QIP proceeds to be used for deleveraging and expansion

Key takeaways from the interview of Mr Nitin Sood, CFO of PVR Limited (PVR): dated 31st October 2019 published with CNBC TV18:

·       Mr Sood mentioned that the company successfully completed the Qualified Institutional Placement (QIP) which was followed by the big slate of releases during the Diwali weekend.

·       He said that the primary intention of raising the money was to deleverage and a part of the proceeds to scale up the expansion plans all over the country. PVR has continuously opened 80-100 screens every year and the company intends to continue the expansion of the screens and better multiplex experience all over the country. The QIP fetched ₹ 5,000 mn for the company.

·       About the use of fresh capital, he said that the net debt of PVR is around ₹ 13,000 mn and the idea is that the company plans to reduce the leverage by around ₹ 3,000 mn and use the remaining proceeds for continuing investments in the expansion story. As per the guidance, the target is to open 80-100 new screens in the current year.

·       About the occupancy levels during the recent quarter, he said that 2QFY20 was one of the strongest quarters that the company witnessed. The movie flow has been excellent this year on the back of very strong 2018. All the three big Diwali releases have done decent business with the slate of films lined up for release in November- December. The outlook is strong for the company.

·       He talked about sales in terms of other merchandise. He mentioned that Food & Beverages (F&B) spend showed strong growth in the 2QFY20. The average per-person spending on F&B actually moved up by 10% during the quarter which shows that people are considering this as the most important form of entertainment. They are not cutting back on their spending on eating popcorn and food at the cinemas.

·       Total footfall growth during 2QFY20 was 25% higher from last year. This includes the new screens that the company built but even same-store growth during the quarter was strong at 6-7%. He considers it as a good indicator that people are coming back to cinemas to watch movies.

·       According to him, cinemas are investing heavily in reinventing the choice of offering one get at the theatres and the company is having a lot of focus on that front which is helping them to drive consumption up in the cinemas.

Consensus Estimate (Source: market screener website)

  • The closing price of PVR was ₹ 1,780/- as of 31-October-19. It traded at 41x/ 31x/ 25x the consensus EPS for FY 20E/ FY 21E/ FY 22E of ₹ 43.2/ 57.3/ 71.2 respectively.
  • Consensus target price of ₹ 1,983/- implies a PE multiple of 28x on FY22E EPS of ₹ 71.2/-.
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