PVR bucks slowdown trend with blockbuster show

PVR’S strong September quarter (Q2) results indicate that multiplexes remain outliers amid the slowing consumption, a trend likely to continue in the near term.

Improved footfall and occupancy — which points towards customers’ willingness to spend on entertainment — provided a strong impetus to PVR’S top line. Consolidated top line grew 37.3 per cent year-on-year (YOY) to ~973.2 crore, significantly beating the Bloomberg consensus of ~894 crore.

In Q2, while customer footfall increased by 25 per cent YOY, occupancy rate

rose to 37.8 per cent from 34.6 per cent last year. Strong content (films such as Super 30, Mission

Mangal, Chhichhore) and higher appetite of individuals to watch movies in multiplexes augured well.

In fact, PVR witnessed its highest ever footfall in Q2, said the management. As a result, revenue from its two key segments — box office and food & beverages (F&B) — surged 32-38 per cent YOY. F&B revenue was also supported by a 12 per cent YOY increase in spends per head. Both segments account for over 80 per cent of PVR’S standalone revenue.

It clocked 16 per cent rise in advertising revenues, despite the feeble economic conditions. Long-term partnerships (25-30 per cent of ad revenue) and screen presence (800 in 69 cities) were other advantages.

Favourable operating leverage and cost efficiency led to a decline in operating expenses as a percentage of sales. This, along with the new lease accounting rule, pushed up Ebitda margin by 1,518 bps YOY to 32.7 per cent, while net profit rose 35 per cent YOY to ~47.9 crore, against expectations of ~36.5 crore. Excluding the IND -AS 116 impact, Ebitda margin was up 248 bps to 20 per cent.

Good content will continue driving the PVR show. According to Nitin Sood, chief financial officer of PVR: “October started on a good note in terms of content and advertising revenue. We are confident that advertising revenue will continue to grow in the next two quarters.”

Bhupendra Tiwary, analyst at ICICI Securities, says: “The content pipeline appears strong for the next couple of quarters. We estimate close to 20 per cent revenue growth and 18 per cent Ebitda growth, excluding I ND -AS i mpact, f or FY20.”

However, a sharp 17 per cent rally in share prices over the last month could limit the upside.