PVR LIMITED : LEADER IN ITS INDUSTRY !!!

Scrip Code: 532689/ PVR

CMP:  Rs. 664.45; Buy at current levels & Accumulate at every dips.

Medium to Long term Target – Rs. 730; STOP LOSS – Rs. 611.30; Market Cap: Rs. 2,731.30 Cr; 52 Week High/Low: Rs. 705.00 / Rs. 317.05

Total Shares: 4,11,06,220 shares; Promoters : 1,18,95,970 shares – 28.94 %; Total Public holding : 2,92,10,250 shares – 71.06 %; Book Value: Rs. 156.52; Face Value: Rs. 10.00; EPS: Rs. 14.05; Dividend: 10.00% ; P/E: 47.30 times; Ind P/E: 41.05; EV/EBITDA: 14.72.

Total Debt: 601.44 Cr; Enterprise Value: Rs. 3,299.70 Cr.

PVR LIMITED : PVR Limited was incorporated in 1995 and is based in Gurgaon, India. PVR LTD was incorporated in April 1995 pursuant to a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow Limited, one of the largest exhibition companies in the world. PVR Limited is an India-based company that operates movie houses in India. PVR Ltd came with an IPO on December 08, 2005 with an issue price of Rs. 225 per share and raise about Rs. 173.25 Cr with an objective to utilize the proceeds to finance the then new cinema projects in various cities across the country, to expand the film distribution business, technological up gradation and renovation of cinemas. The Company also generates revenue from in-cinema advertisements and products displays and in-cinema sale of food and beverages. It also produces and co-produces movies; and distributes movies, as well as operates 24 lane bowling centers. PVR, Currently controls 434 screens including 135 screens with Cinemax India Ltd at 92 locations across 37 cities in 13 states and 1 Union Territory. PVR's subsidiaries include CR Retail Malls India Ltd (CRR), Cine Hospitality Private Ltd, PVR Pictures Ltd (PVR Pictures) and PVR bluO Entertainment Ltd (PVR bluO). The Company has diverse cinema circuit in India consisting of 35 Cinemas with 154 screens spread over 20 different cities: Delhi, Faridabad, Gurgaon, Ludhiana, Ghaziabad, Mumbai, Bangalore, Hyderabad, Chennai, Lucknow, Indore, Aurangabad, Baroda, Allahabad, Ahmedabad, Udaipur, Chandigarh, Surat, Latur and Raipur. On January 8, 2013, PVR through its wholly owned subsidiary Cine Hospitality Private Ltd purchased a controlling stake of over 69 %  followed by the open offer for another 26 % in the Cinemax India Limited for Rs. 395 Cr or Rs. 203.65 per sgare from the Rashesh Kanakia and family. PVR Ltd is locally compared with Prime Focus ltd, Reliance Broadcast Network Ltd, Balaji Telefilms ltd, Media Matrix Worldwide Ltd, Shree Ashtavinayak Cine Vision Ltd, Tips Industries Ltd, Fame India Limited, Cinemax Properties Ltd, Era E Zone (India) Ltd, Pyramid Saimira Theatre Limited and Inox Leisure Ltd and globally compared with Walt Disney Co of US California, Time Warner Inc of USA, IG Port Incorporated of Japan, Twenty First Century Fox, Inc of New York, Lions Gate Entertainment Corp of California,  UTV Media PLC of UK, Dreamworks Animation Skg Inc of California, Orange Sky Golden Har. Ente. Holdings Ltd of Hong Kong, Kinepolis Group NV of Belgium, Cinemax X AG of Germany, Digital Cinema Destination Corp of United States and Reading International Inc of United states, Geo Dinos Company Ltd of Japan, Nakanihon Kogyo Company Ltd of Japan.

Investment Rationale:

Priya Village Roadshow (PVR) Cinemas is a leading cinema chains in India. The company began as a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow limited in 1995 with 60:40 ratios. PVR pioneered the multiplex revolution in the country by establishing the first multiplex cinema in 1997 at Saket, New Delhi. This opening of the first multiplex opened up a new era in the Indian cinema viewing experience, which also set a role model for others to follow suit. In 2002, the Village Road Show exited the JV and company changed its name to PVR Limited and in 2003, ICICI Ventures made an investment in PVR and from there on it was no looking back. PVR has set new benchmarks in the cinema exhibition business including establishment of the first largest 11 screen multiplex in the country, Gold Class Cinema, luxury cinema, IMAX theatres and ECX (Enhanced Cinema Experience). PVR, Currently controls 434 including 135 Screens with Cinemax India Ltd at 92 locations across 37 cities in 13 States and 1 Union Territory. It also plans to open another 500 screens by 2015. PVR commands a significant presence in New Delhi and NCR with 55 screens in 16 multiplexes. PVR also has its strong presence in major Indian cities. The Cinemax acquisition makes PVR a leader in the exhibition space and gives a strong bargaining power. PVR has an impressive market share of of around 28 % including Cinemax in the total 1600 multiplex screens in the country. After the Cinemax acquisition, the company has a combined revenue share of 20 % to 22 % in Bollywood and 30 % to 35 % in (Hollywood) of multiplex revenues. The company has about 434 screens as on date and plans to augment its market share by rolling out 60 to 70 screens each year. This leadership position gives PVR the leverage to negotiate better deals with movie producers. It is expected that the total tally at PVR to reach 481 screens with 109 properties in FY15E and 537 screens with 119 properties in FY16E. PVR also plans to approach the next government for a minimum window norm before movie releases are available on other platforms. Management is planning to “re-brand” all the Cinemax screens to PVR which will take 24 months. So far only 2 Cinemax screen is rebranded to PVR and company has seen 25 % increases in revenue. Thus management believes that re-branding is encouraging. As an innovation in marketing strategy, company has tied up with Unilever for marketing on “pay per eye ball” basis. Company is planning to focus on corporate & bulk bookings as a part of new marketing initiative. Currently corporate booking revenue is miniscule at around Rs. 12.5 Cr. However company sees a big potential in this segment. Two marketing employees are allocated at every screen who will market to corporate and colleges in the vicinity of 8 to 10kms. About 8 to 9 % of the all shows were “housefull” shows. The timing of the movies are allotted in such a way that 70 to 75 % occupancy is reached and balance 20 to 25 % are kept as a buffer to handle unexpected increase in demand. The Annual maintenance capex comes at 1-2 % of revenue. Every screen requires refurbishment after 6-8 years to keep the cinema maintained and fresh. This amounts to 20-30 % of original capex. Capex required is on an average of Rs. 2.5 Cr per screen. Of the total 434 screens, 2/3rd screens are older than 2 years. The Company's growth is slow in East and is still not able to find right malls and location for expansion in East. But management continues to look for good opportunity in East. PVR’s occupancy rate for FY14 was around 34 %. PVR is evolving itself into a lifestyle entertainment company and the acquisition of Cinemax proved to be a master stroke which helped PVR to become industry leader. PVR’s has good prospects with improvement in RoCE and RoE with free cash flow visibility and with the timely execution of the given aggressive roll-out plan it will maintain its leadership position.

Outlook and Valuation:

PVR, a pioneer in multiplex in India and is the largest cinema exhibition player in the country today. Post the acquisition of Cinemax, PVR has become India’s largest multiplex chain with 97 properties, 434 screens and 101k seats. PVR is India’s largest and fastest growing multiplex chain with market share of about 23-25 % in Bollywood market and with 33-35 % of market share in Hollywood market. Being the only large player and the way it is expanding itself aggressively will definitely makes PVR an undisputed leader and will further extend its leadership to higher scales. The recent KPMG report anticipates the market size of Indian Music & Entertainment sector to touch Rs 1,45,700 Cr (US$ 25.51 billion) by 2016. There is increased penetration in Indian markets, which is expected to even intensify further, owing to a revolution brought in by digital technology. Wireless broadband, growing internet usage, cable digitisation and higher DTH adoption would further drive Indian M&E industry to new heights. The report also noted that smart phones, tablets, gaming devices have laid the foundation of a new wave in the industry. Also, the Investments inflows in the movie production space are set to multiply, several movie studios such as Virgin Produced India, Fox Star Studio plans to step up investments in Bollywood. Along with the higher investments and with higher quality content driven by heavy investments would lead to higher demand for movie related entertainment. PVR would be benefited from the increased occupancies and rising Average Ticket Price (ATPs). PVR has offerings across the consumer segments like in Luxury Cinema Viewing it has Directors Cut with ticket prices ranging from Rs. 1,044 to Rs. 1276; in Comfortable Reclining Seats it has Gold Class with ticket prices ranging from Rs. 696 to Rs. 928; in Catering to Upper Middle Class it has PVR Premiere with ticket prices ranging from Rs. 174 to Rs. 348; in Comfortable Regular Seatings it has PVR Mainstream with ticket prices ranging from Rs. 116 to Rs. 174; in Low cost Multi-screen cinemas it has PVR Talkies with ticket prices ranging from Rs. 58 to Rs. 116. It is expected that PVR’s Average Ticket Prices to register a growth of 7 % at Rs. 177 by the end of FY15E and a growth of 3 % to Rs. 182 by the end of FY16E. Moreover, as disposable incomes increase, Foods & Beverages (F&B) spends are also expected to rise to Rs. 60 in FY15E and to Rs. 62 by the end of FY16E, from Rs. 53 currently. PVR is strategizing to augment its advertising revenues by about 25 to 30 % YoY by providing advertisers various deals such as pay per eyeballs and other innovative deals. The company has earned about Rs. 141.9 crore in FY14. PVR has about 59.9 million footfalls segregated on various counts, which gives advertisers unmatched opportunity to reach the target audience. It is expected that PVR can see a growth rate of 15 % and 13 % to reach or Rs. 163 and Rs. 184 crore of advertisement revenues by FY15E and FY16E, respectively and thus Advertisement revenue would be PVR’s new noticeable revenue stream. Moreover, a gradual recovery in economic activity will increase disposable incomes to keep growth buoyant. Company is expected to benefit immensely with implantation of GST as the entertainment tax will be offsetted against GST. Average entertainment tax is believed to reduce from 23 % currently to 16 % post the implementation of GST. Also, company will be able to avail tax credit of tax paid on input cost if the act is implemented which will reduce its tax liability. PVR reported sales of Rs. 314 Cr in 4QFY14, compared to Rs. 335 Cr in 4QFY14, marking a YoY growth of 28 %. On result front, PVR poseted a revenue growth in 4QFY14 was primarily due to delivery of low budget films like Queen and 2 States. EBITDA margin for 4QFY14 stood at 10.5 % as against 6.7 % in 4QFY13, primarily due to higher operating leverage. Company reported PAT at Rs. 80 lakhs in 4QFY14, against Rs. 11.7 Cr in 4QFY13, de-growing by 93 %. This was primarily due to higher tax credit of Rs. 29.4 Cr in 4QFY13 as against Rs. 4 Cr in 4FY14. There was an exceptional gain of Rs. 8.5 Cr during the quarter on account of profit from sale of Anupam Multiplex property; common area maintenance, rent expense, property tax relating to earlier year and assets written off during the period. PVR at the end of FY14 has net debt of Rs. 580 Cr, with given strong operating performance and debt repayment over next 2 years, the balance sheet is expected to improve in meaningful way and it is assumed that there would be an debt reduction of Rs. 30 Cr and Rs. 50 Cr in FY15 and FY16 respectively. Going forward, the cash generation would support capex requirement as well as debt repayment. In past, the company has been aggressively expanding its screens presence, and this has resulted in capex in excess of Operating Cash Flow and that lead to an increase in debt. But now, the capex would be lower than the OCF generation and hence would lead to surplus cash to re-pay its debts and this improving balance sheet will command premium multiple. PVR Management has guided to add 60-70 screens in FY15. They target to add 300-450 screens in next 3-4 years. Management has no plans for equity dilution and signals that PVR is adequately funded for the future growth. A 50-bp drop in the average occupancy ratio erodes could affect the price of the stock by 5 %. At the current market price of Rs. 664.45, the stock P/E ratio is at 38.63 x FY15E and 23.81 x FY16E respectively. PVR can post EPS of Rs. 17.20 and Rs. 27.16 respectively. The content pipeline of the company is exciting and would propel the further growth of PVR. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. PVR can touch Rs. 875 in near future. 

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	805.00	1,351.20	1,640.10	2,022.50
NET PROFIT (₹ Cr)	45.00	50.40	70.90	113.10
EPS (₹)	11.20	13.60	17.20	27.50
PE (x)	51.50	42.40	33.50	21.00
P/BV (x)	3.60	6.00	5.20	4.30
EV/EBITDA (x)	24.20	12.10	9.40	6.90
ROE (%)	6.90	10.80	16.50	22.30
ROCE (%)	4.60	11.10	15.50	22.30

I would buy PVR LTD for Medium to Long term for target of Rs. 730.00 and may touch Rs. 875.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 611.30 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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ENTERTAINMENT NETWORK INDIA LTD : ADD SOME SPICE TO YOUR PORTFOLIO !!!

Scrip Code: 532700 / ENIL

CMP:  Rs. 397.30; Buy at current levels.

Short Term Target: Rs. 420.00; Medium to Long term Target: Rs. 445; STOP LOSS – Rs. 365.51; Market Cap: Rs. 1,893.94 Cr; 52 Week High/Low: Rs. 420.00 / Rs. 191.15

Total Shares: 4,76,70,415 shares; Promoters : 3,39,18,400 shares – 71.15 %; Total Public holding : 1,37,52,015 shares – 28.85 %; Book Value: Rs. 105.37; Face Value: Rs. 10.00; EPS: Rs. 18.43; Dividend: 10.00 % ; P/E: 21.55 times; Ind. P/E: 35.46; EV/EBITDA: 13.58.

Total Debt: ZERO; Enterprise Value: Rs. 1,882.82 Cr.

ENTERTAINMENT NETWORK (INDIA) LIMITED: The Company was incorporated in 1999 and is based in Mumbai, India. Entertainment Network (India) Limited is a subsidiary of Times Infotainment Media Limited which is a part of media giant Bennett Coleman & Co. Entertainment Network (India) Limited operates FM radio broadcasting stations under the Radio Mirchi brand name in India. Its Radio Broadcasting segment engages in airtime sales activities. The company’s Events segment engages in activities relating to managing events, and creating and marketing media properties. It operates a network of 32 radio stations in 14 states. ENIL came with an IPO in January 2006 with 1,20,00,000 equity shares of face value of Rs. 10 each offered at Rs. 162 per share, the shares got listed on exchanges on 15 February 2006 at Rs. 242.00. The funds raised from the IPO was utilised to participate in the bidding for FM channels in new cities and finance the migration fee to shift to the new licensing regime. ENIL is locally compared with BAG Films and Media, Network 18 Media, TV18 Broadcast Ltd, Reliance Broadcast Network Ltd, Zee Media Corporation, Dish TV India limited, ZEE Entertainment, TV Today network, New Delhi Tele Vision, Hinduja Ventures, Broadcast Initiatives Ltd and Globally compared with AMC Networks Inc. of USA, A.H. Belo Corp of USA, Cablevision Systems Co of USA, Clear Channel Outdoor from New York, Comcast Corp of USA, Directv of New York, Dish network Corp of USA, Discovery Communication of USA, Bloombury Publishing Plc of London, British Sky Broadcasting Gro of London, Daily Mail & General Trust of London, Borussia Dortmund Gmbh & CO of Germany, Kabel Deutschland Holding AG of Germany, Sky Deutschland AG of Germany, Societe D’edition De Canal Plus S.A of France, Lagardere Active broadcast from Monaco, Modern Times Group MTG AB from Stockholm-Sweden, NextRadio TV SA from France, NRJ Group from Paris, Cairo Communication Spa of Egypt, Telenet Group Holding Nv from Belgium, Wolters Kluwer Nv from Netherlands, Times media Group Ltd from Johannesburg, Caxton And Ctp publishers AN from Johannesburg, Naspers Ltd from South Africa.   

Investment Rationale:

Entertainment Network India Ltd is part of the media giant Bennett, Coleman & Co Ltd group which has been publishing "The Times of India", "Economic Times" and regional variants since 1838. ENIL operates in 32 circles in India under the brand "Radio Mirchi" with "Mirchi sun ne wale always khush" (Mirchi audience is always happy) as its tag line. The "Tikhi Mirchi" (spicy/hot chilli) attracts about 4.1 Cr listeners with its contemporary music offering. Indian Radio industry has grown from Rs. 600 Cr in 2006 to Rs. 1540 Cr in 2014, from 64 community radio stations in 2009 to 163 community radio stations in 2014 and have 245 FM channels in 85 cities since 2005, and proposed to have 839 channels in 294 cities. The KPMG FICCI Media & Entertainment 2013 report suggests that there can be a growth of 16.6 % CAGR in radio ad-spend over 2012 - 2017. Radio is devoid of subscription revenues and depends upon ad-spends. If radio advertising were to rise to half the global standards of 0.9 x GDP, then ENIL and the industry will then have potential to grow about 4 times. TRAI regulations restrict TV Ad times to 10 minutes of external ads. Some channels have already implemented this with a resultant sharp rise in ad rates given lower inventory. Hence, low budget advertisers have shifted to cheaper mediums on TV, print and even radio. Radio is a key beneficiary if this is fully implemented. Election advertising in the 4 recent state elections through Radio boosted revenues and should contribute more to the revenues in view of the upcoming Central elections in MAY 2014. As per the views of the management, the radio industry, continued to lead print and TV in terms of the growth, Radio has shown a growth of 12 % to 13 % in this quarter. ENIL had built in higher estimates for the company on the bases of Political advertising, but this did not contribute significantly to revenues. The company argued that the sharp monitoring of electoral spends during the elections has contained the flows to the media companies. It has also been seen that the radio industry is benefiting from the price hikes being taken by television broadcasters and the confusion is being created by the 12 minute TRAI ad cap for TV broadcasters coupled with the lack of clarity on independent rating agencies. The management has guided at stepping up investments in the coming quarters in a bid to strengthen its employee base and also enhance its brand image to prepare for the post Phase III auction scenario. This, however, could pressurise the company’s margins. The company is already close to peak its utilisation levels and future growth would accrue from price hikes. New capacity would be added only post the phase III auction. The capacity problem is poised to get sorted out with emerging clarity on Phase III auctions, which, as per the management, are expected within next four months. Moreover, the management also talks about the Phase II licenses expiring in April next year. Both auctions put together are likely to reduce the cash balance available with the company. Also, the radio industry, in general, would benefit from being a cheaper advertisement alternative in the backdrop of a general economic slowdown.

Outlook and Valuation:

ENIL operates in the radio broadcasting segment, out-of-home media segment and experiential marketing segment. The company has a strong backing of the promoter group the Times group. ENIL operates under the brand RADIO MIRCHI which is the No.1 radio brand in private FM space. ENIL has the network across 14 states with 32 stations and has more than 4.1 Cr listeners across all its stations. ENIL’s experiential marketing operations are under its subsidiary Alternate Brand Solutions (India) Ltd and operate under the brand 360. ENIL manages its own event brands like Spell Bee, Gadget Awards, Design Warz and Teen Diva. Radio industry draws major portion of its revenue from advertisement industry. It is seen that there is positive correlation between the economic growth rate and advertisement growth rate. As India is the second fastest growing economy in the world, the ad spend is also bound to increase. Radio is a cost effective medium to the advertiser and which works as a complementary medium towards Television and print media. Radio has low cost of content and its prime time differs totally from television and so has its own dedicated audience. ENIL has proven its ability to operate in different market and has established Radio Mirchi as a strong brand in the industry to reckon with. ENIL has a very capable and highly qualified sales and marketing team and it invests in high quality technology sourced mainly from USA & Canada. ENIL reported 13 % growth in revenues. Growth in advertising continued to be led by higher inventory utilization of 89 % on a blended basis in the quarter, but the company was also able to improve its yields, which contributed about 4 % to the growth. Cost were well contained in the quarter with modest de-growth in marketing spends. ENIL reported robust 27 % growth in EBITDA. Recently, the Bharatiya Janata Party (BJP) has launched three radio ads mainly in the North Indian markets. These ads uses the tagline "Chalo halat badle, Chalo Saarkar badle, Abki baar Modi Saarkar", are plain narratives on women safety, unemployment and inflation. The party has not launched these ads in Madhya Pradesh and Gujarat. It intends to launch separate compaigns for the states. As, ENIL holds good market share, it is expected that ENIL will attract more of political ads for the forth coming general election. The company expects that political advertising shall contribute more in the coming quarters, as a lot of advertising shall happen well before elections. The company expects the radio industry to benefit to the extent of around Rs. 50 Cr on account of political advertising. Political advertising shall also generate a higher yield for the network as a whole, thus having a positive impact on pricing. It is likely that these benefits shall come in 1QFY15. The company reported a cash balance of Rs. 395 Cr. As such, ENIL is among the few radio companies that have a strong balance sheet going into the auction process. The company maintained that it is unlikely that the auctions shall draw unrealistic valuations for the frequencies, since the 'winner's curse' is now well recognized in the FM radio industry. For ENIL, there was a blended capacity utilisation of 89 % this quarter while utilisation has already peaked in its top eight stations. Hence, growth will be mostly price led. This has been factored in as 14.6 % and 13.5 % revenue growth for FY14E and FY15E, respectively. At the current market price of Rs. 397.30, the stock is trading at a PE of 22.19 x FY14E and 21.71 x FY15E respectively. The company can post Earnings per share (EPS) of Rs. 17.90 in FY14E and Rs. 18.30 in FY15E. One can buy ENIL with a target price of Rs. 445.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 420.00

KEY FINANCIALS	FY12	FY13	FY14E	FY15E
SALES (₹ Crs)	311.00	339.60	383.90	435.10
NET PROFIT (₹ Cr)	56.10	68.30	85.20	87.00
EPS (₹)	11.80	14.30	17.90	18.30
PE (x)	29.80	24.50	19.60	19.20
P/BV (x)	4.20	3.60	3.10	2.80
EV/EBITDA (x)	16.00	14.40	11.10	9.50
ROE (%)	12.80	13.60	14.60	13.10
ROCE (%)	15.30	14.50	16.40	15.60

I would buy ENTERTAINMENT NETWORK INDIA LTD for Medium to Long term for target of Rs. 445 and for the shorter term the target would br Rs. 420.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 365.51 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

VIEW THE POWER POINT PRESENTATION ON

RETURN ON CAPITAL

PVR LTD: CASHING ON DIWALI RELEASES !!!

Scrip Code: 532689/ PVR

CMP:  Rs. 495.15; Accumulate between 475 - 495 levels.

Medium to Long term Target – Rs. 522.50 - 544.50; STOP LOSS – Rs. 437.00; Market Cap: Rs. 1,961.63 Cr; 52 Week High/Low: Rs. 565.85 / Rs. 202.55

Total Shares: 3,96,16,995 shares; Promoters : 1,22,95,970 shares –31.04 %; Total Public holding : 2,73,21,025 shares – 68.96 %; Book Value: Rs. 157.20; Face Value: Rs. 10.00; EPS: Rs. 15.39; Dividend: 10.00% ; P/E: 32.17 times; Ind P/E: 33.37; EV/EBITDA: 20.36.

Total Debt: 601.44 Cr; Enterprise Value: Rs. 2,277.14 Cr.

PVR: PVR Limited was incorporated in 1995 and is based in Gurgaon, India. PVR LTD was incorporated in April 1995 pursuant to a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow Limited, one of the largest exhibition companies in the world. PVR Limited is an India-based company that operates movie houses in India. PVR Ltd came with an IPO on 8th December 2005 with an issue price of Rs. 225/share and raised about Rs. 173.25 Cr with an objective to utilize the proceeds to finance the then new cinema projects in various cities across the country, to expand the film distribution business, technological up gradation and renovation of cinemas. The Company also generates revenue from in-cinema advertisements/product displays and in-cinema sale of food and beverages. It also produces and co-produces movies; and distributes movies, as well as operates 24 lane bowling centers. The company operates 213 screens in 46 cinemas in 27 cities. Company’s subsidiaries include CR Retail Malls (India) Limited (CRR), PVR Pictures Limited (PVR Pictures) and PVR bluO Entertainment Limited (PVR bluO). The Company has diverse cinema circuit in India consisting of 35 Cinemas with 154 screens spread over 20 different cities: Delhi, Faridabad, Gurgaon, Ludhiana, Ghaziabad, Mumbai, Bangalore, Hyderabad, Chennai, Lucknow, Indore, Aurangabad, Baroda, Allahabad, Ahmedabad, Udaipur, Chandigarh, Surat, Latur and Raipur. PVR Ltd announced the opening of a multiplex on August 15, 2012, at Empress Mall, in Nagpur in the state of Maharashtra. The multiplex consists of five screens. On January 8, 2013, PVR through its wholly owned subsidiary Cine Hospitality Private Ltd purchased a controlling stake of over 69 % followed by the open offer for another 26% in the Cinemax India Limited for Rs. 395 Cr or Rs. 203.65 per share from the Rashesh Kanakia and family. PVR Ltd is locally compared with Prime Focus ltd, Reliance Broadcast Network Ltd, Balaji Telefilms ltd, Media Matrix Worldwide Ltd, Shree Ashtavinayak Cine Vision Ltd, Tips Industries Ltd, Fame India Limited, Cinemax Properties Ltd, Era E Zone (India) Ltd, Pyramid Saimira Theatre Limited and Inox Leisure Ltd and globally compared with Walt Disney Co of US California, Time Warner Inc of USA, IG Port Incorporated of Japan, Twenty First Century Fox, Inc of New York, Lions Gate Entertainment Corp of California,  UTV Media PLC of UK, Dreamworks Animation Skg Inc of California, Orange Sky Golden Har. Ente. Holdings Ltd of Hong Kong, Kinepolis Group NV of Belgium, Cinemax X AG of Germany, Digital Cinema Destination Corp of United States and Reading International Inc of United states.

Investment Rationale:

Priya Village Roadshow (PVR) Cinemas is a leading cinema chains in India. The company began as a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow limited in 1995 with 60:40 ratios. PVR is on a spree of opening new multiplexes it opened cinema halls in Ambience mall, Gurgaon in 2007 named “PVR Ambinece Premier” as first 2K Dolby Digital multiplex with five Premier class auditoria and two Glod Class auditoria. Currently PVR controls 398 including 135 Screens with Cinemax India Ltd at 92 locations across 37 cities in 13 States and 1 Union Territory. It also plans to open another 500 screens by 2015. PVR commands a significant presence in New Delhi and NCR with 55 screens in 16 multiplexes. PVR also has its strong presence in Chandigarh, Bhopal, Ludhiana, Nagpur, Chennai, Lucknow, Indore, Hyderabad, Bangaluru, Mumbai, Nanded, Ahmedabad, Kochi, Udaipur, Vijayawada and Visakhapatnam. PVR recently launched its premium brand, PVR Premiere, targeting urban consumers in metros. The company operates three other brands, PVR Talkies, the no-frills cinemas for consumers in tier II cities, the original PVR Cinemas targeted at the urban & semi-urban consumers and PVR Director's Cut for ultra luxury watching. Recently PVR opened a Multiplex at Diamond Plaza Mall, Jassore Road, Kolkata in the State of West Bengal, this is of Five Screens Multiplex and is fitted with latest Sound and Projection System. PVR opened another Multiplex at Koregaon Plaza Mall, Pune, Maharashtra; this is a Seven Screens Multiplex with 1519 Seats operational from 8 September 2013 fitted with latest Sound and Projection System. PVR has witnessed a very good increase in Footfalls and Average Ticket Price. The footfalls in Q1FY14 were higher on account of the good box office performance by movies like Yeh Jawani Hai Deewani, Raanjhnaa and Aashiqui 2. Footfalls increased from 1.15 Cr in Q4FY13 to 1.51 Cr in the current quarter. The addition of 23 new screens in the PVR portfolio helped to the increase the footfalls numbers. The company has also been able to report an impressive hike in ATP, which increased from Rs. 172 and Rs. 153 in Q4FY13 to Rs. 174 and Rs. 160 for PVR and Cinemax properties, respectively. The management indicated the ATPs of screens with similar stature of PVR and Cinemax would converge subsequently as the company would hike Cinemax’s ATP as and where suitable. PVR reported its Q1FY14 numbers, with a top line of Rs. 335.2 crore on the back of higher-than-expected footfalls, which increased to 1.51 Cr. The company reported a consolidated EBITDA margin of 17.7 % while the EBITDA for the quarter stood at Rs. 59.4 crore, growing 76 % YoY. However, exceptional item on account of write-off of CWIP towards discontinued projects and provisions for items under litigation marred PAT, which came in at Rs. 13.6 crore. The property expansion in this quarter has been impressive along with remarkable increase in ATP. It is expected that PVR could launch 48 more screens in this fiscal.

Outlook and Valuation:

PVR DIRECTORS CUT VASANT KUNJ

The recent KPMG report anticipates the market size of Indian Music & Entertainment sector to touch Rs 1,45,700 Cr (US$ 25.51 billion) by 2016. There is increased penetration in Indian markets, which is expected to even intensify further, owing to a revolution brought in by digital technology. Wireless broadband, growing internet usage, cable digitisation and higher DTH adoption would further drive Indian M&E industry. The report also noted that smart phones, tablets, gaming devices have laid the foundation of a new wave in the industry. There are 10 number of screens per 10 lakh people in India as against 120 screens per 10 lakh people in USA. A stream of several successful Hindi and English film releases drove PVR’s strong results. Every ticket of Rs. 100 sold is divided as Rs. 20 as entertainment tax, Rs. 36 to distributors and then Rs. 44 for the multiplexs. Multiplexes enjoys margin of around 30 % on Exhibition, margin of around 65 % on food & berverages and margin of around 80 % on advertisement - translating into revenue of around Rs. 68 for exhibition, Rs. 25 for food & berverages and Rs. 7 for advertisment. On a comparable basis, combined revenues and EBITDA for PVR and Cinemax were up respectively 23 % and 9 %. Revenues and EBITDA for 1QFY14 came 6 % ahead of our estimates, following stronger-than-expected footfalls and average ticket prices (ATP). ATP for Cinemax now stands at Rs. 160, versus Rs. 174 for PVR. Lack of operating leverage suggests a likely increase in repairs, maintenance and general upkeep expenses to improve the quality of service / experience offered to visitors. It is believed that buoyancy in the film industry continues to drive the results, the Film exhibition revenue has registered a 17 % CAGR over CY10-12. In CY13 so far, net box-office collections from Hindi and Hollywood films climbed 27 % yoy. During 1QFY14, collections were up 39%. In the past six months the company’s valuations have surged owing to its strong business and earnings growth in FY13, and the Cinemax acquisition (which marks major industry consolidation). The stock trades at 18x oneyear forward-PE, broadly similar to the average of the last six months. It is expected that this valuations to be sustained by growth in the industry and for the company. A 50-bp drop in the average occupancy ratio erodes could effect the price of the stock by 5 %. At the current market price of Rs. 495.15, the stock P/E ratio is at 22.92 x FY14E and 18.33 x FY15E respectively. Earning per share (EPS) of the company for the earnings for FY14E and FY15E is seen at Rs. 21.60 and Rs. 27.00 respectively. The content pipeline of the company is exciting, with big releases this diwali like Hrithik Roshan starrer Krish-3, Ranveer and Deepika starrer RAMLEELA, Imran and Karina Starrer Gori Tere Pyaar Mein and Sunny deol's action movie Singh Sahab The Great, will be an great oppurtunity for PVR and would be benefited as a major market share holder. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. Eros is trading at a significant discount to other media businesses. Factoring in revenue and PAT CAGR of 17.4% and 14.3%, respectively, in FY13-15, PVR Cinemas could be a good ‘BUY’ with a target price range of Rs. 522.50 - 544.50 for Medium to Long term investment

KEY FINANCIALS	FY12	FY13E	FY14E	FY15E
SALES (₹ Crs)	513.10	809.70	1,410.50	1,595.40
NET PROFIT (₹ Cr)	25.40	44.50	85.70	107.10
EPS (₹)	9.80	11.20	21.60	27.00
PE (x)	35.70	31.20	16.20	13.00
P/BV (x)	3.30	2.20	1.90	1.70
EV/EBITDA (x)	19.40	15.80	7.40	6.10
ROE (%)	9.10	6.90	11.80	12.90
ROCE (%)	9.00	6.00	11.30	11.90

I would buy PVR LTD for Medium to Long term for target of Rs. 522.5 - 544.50. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or ₹ 437.00 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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PVR LTD : EXHIBITING ITS STRONG FOOT HOLD !!!

Scrip Code: 532689 / PVR

CMP:  Rs. 286.75; Accumulate at every  levels.
Short term Target – Rs. 300; STOP LOSS – Rs. 263.80; Market Cap: Rs. 1,136.01 Cr; 52 Week High/Low: Rs. 340.90 / Rs. 141.00

Total Shares: 3,96,16,995 shares; Promoters : 2,23,09,467 shares –56.31 %; Total Public holding : 1,73,07,528 shares – 43.68 %; Book Value: Rs. 70.35; Face Value: Rs. 10.00; EPS: Rs. 5.45; Div: 60 % ; P/E: 52.61 times; Ind P/E: 30.79; EV/EBITDA: 6.80.

Total Debt: Rs. 225 Cr; Enterprise Value: Rs. 1,599.01 Cr.

PVR LIMITED: PVR Limited was incorporated in 1995 and is based in Gurgaon, India. PVR LTD was incorporated in April 1995 pursuant to a joint venture agreement between Priya Exhibitors Private Limited and Village Roadshow Limited, one of the largest exhibition companies in the world. PVR Limited is an India-based company that operates movie houses in India. The Company also generates revenue from in-cinema advertisements/product displays and in-cinema sale of food and beverages. It also produces and co-produces movies; and distributes movies, as well as operates 24 lane bowling centers. The company operates 213 screens in 46 cinemas in 27 cities. Company’s subsidiaries include CR Retail Malls (India) Limited (CRR), PVR Leisure Ltd, PVR Pictures Limited (PVR Pictures), Cine Hospitality Private Ltd and PVR bluO Entertainment Limited (PVR bluO). The Company has diverse cinema circuit in India consisting of 35 Cinemas with 154 screens spread over 20 different cities: Delhi, Faridabad, Gurgaon, Ludhiana, Ghaziabad, Mumbai, Bangalore, Hyderabad, Chennai, Lucknow, Indore, Aurangabad, Baroda, Allahabad, Ahmedabad, Udaipur, Chandigarh, Surat, Latur and Raipur. PVR Ltd announced the opening of a multiplex on August 15, 2012, at Empress Mall, in Nagpur in the state of Maharashtra. The multiplex consists of five screens. On January 8, 2013, PVR through its wholly owned subsidiary Cine Hospitality Private Ltd purchased a controlling stake of over 69% followed by the open offer for another 26% in the Cinemax India Limited for Rs. 395 Cr or Rs. 203.65 per share from the Rashesh Kanakia and family. PVR Ltd is locally compared with Fame India Limited, Cinemax Properties Ltd, Era E Zone (India) Ltd, Pyramid Saimira Theatre Limited and Inox Leisure Ltd and globally it is compared with Orange Sky Golden Har. Ente. Holdings Ltd of Hong Kong, Kinepolis Group NV of Belgium, Cinemax X AG of Germany, Digital Cinema Destination Corp of United States and Reading International Inc of United states.

Investment Rationale:

PVR pioneered the multiplex revolution in the country by establishing the first multiplex cinema in 1997 at Saket, New Delhi. The opening of the first multiplex heralded (started a good beginning)  a new era in the Indian cinema viewing experience and which also changed the industry forever. From then-on PVR initiated many path breaking innovations in the industry from launching its largest 11 screen multiplex in the country in 2004 in Bangalore and introducing Gold Class Cinema. PVR Ltd came with an IPO on 8^th December 2005 with an issue price of Rs. 225/share and raised about Rs. 173.25 Cr with an objective to utilize the proceeds to finance the then new cinema projects in various cities across the country, to expand the film distribution business, technological up gradation and renovation of cinemas. PVR entered into a JV with Major Cineplex Group in 2008, a leading Film exhibition and retail entertainment company based out of Thailand, to bring lifestyle entertainment concepts to Indian consumers. The JV enjoined setting up of bowling alleys, karaoke centers, ice skating rings and gaming zones across the country to enhance the out of home entertainment experience for Indian consumers. PVR Cinemas today contributes about 20%-25% of domestic box office collections of any leading Hollywood movie and 12%-13% of any leading Bollywood movie, highest across the Indian Film Exhibition space. On January 8, 2013, PVR through its wholly owned subsidiary Cine Hospitality Private Ltd purchased a controlling stake of over 69% in the Cinemax India Limited for Rs. 395 Cr or Rs. 203.65 per share from the Rashesh Kanakia and family followed by the open offer for another 26% of Rs. 148 Cr, with the success of open offer which ended on 23^rd February 2013, PVR will now look at de-listing of Cinemax which will comply with the norms of SEBI to maintain minimum public shareholding of 25%. With the successful open offer of Cinemax, PVR, which has already added 47 screens this year will have 351 screens in 85 properties across 36 cities in India with 87,493 seats on combined basis, this translates into entertaining a staggering 5.3 Cr customers every year. PVR expects to add 55 more screens by the end of FY14.

Outlook and Valuation:

PVR's IMAX Auditorium in Bengaluru

PVR buyout deal for Cinemax India will cost PVR a total of Rs. 543 Cr, which will be funded through the approval to rise about Rs. 260 Cr through preferential issue of 1,06,25,205 shares of PVR at Rs. 245 per share to PVR promoters viz. Ajay Bijli and Sanjeev Kumar who in total will infuse Rs. 25 Cr which will then will hold 32% in PVR after the fund raising, Multiples Alternate Asset Management Private Equity Fund Ltd will infuse about Rs. 153 Cr which will then own 15.80% in PVR, L Capital Eco Ltd will infuse about Rs. 82.3 Cr into PVR’s preferential issue which will then hold 15.80% in PVR. Thus a an equity dilution of about 36.7 % is slightly negative for the stock but the best side for the stock is that firstly, post deal PVR will become India’s largest Multiplex operator ahead from Inox + Fame who has 256 screens, Big Cinemas who has 254 screens, secondly, it will gain access to eight new markets and northern region, also PVR will be benefited from the stronger foot-hold of Cinemax in western region. PVR will be benefited in spite of the increase of service charge from Rs. 6 to Rs. 14 by the government as multiplex operators will now can retain the increment of Rs. 8 in ticket prices. On consolidated basis the Debt of PVR is around Rs. 600 Cr on the net worth of Rs. 650 Cr, and the debt equity Ratio of PVR is not expected to come down in next 12 -16 months due to its expansion plans. PVR has stated that it will continue to focus on distribution of Hollywood movies. PVR’s profitable subsidiary PVR Leisure has cash of around Rs. 45 Cr and in my view PVR can use this cash for making changes in Cinemax's screens, its food & beverage segment which could be expected to get turnaround in next 12 months period. With a healthy EBITDA of 34% with consolidated revenue of Rs.202.44 Cr, in my view PVR Ltd could report FY13E EPS of Rs. 7.50/sh and for FY 14E of Rs. 14.50/sh. The stock could be bought for the short target price of Rs. 300.00 and recommend Accumulate on the stock. 

Name of the Companies	Number of Screens
PVR Cinemax	351 Screens
INOX + Fame	256 Screens
BIG Cinemas	254 Screens
FUN Cinemas	73 Screens
Cinepolis	49 Screens
Sathyam Cinemas	27 Screens
TOTAL	1,010 Screens

KEY FINANCIALS	FY12	FY13E	FY14E	FY15E
SALES (Rs. Crs)	513.10	825.70	1,322.50	1,465.80
NET PROFIT (Rs. Crs)	25.40	30.20	58.20	74.80
EPS (Rs.)	9.80	7.50	14.50	18.60
PE (x)	26.90	35.10	18.20	14.20
P/BV (x)	2.40	1.70	1.50	1.40
EV/EBITDA (x)	15.30	8.80	5.10	4.20
ROE (%)	9.10	4.70	8.40	9.70
ROCE (%)	9.00	4.80	8.90	9.60

I would buy PVR LTD with a price target of Rs. 300.00 for the short term target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 263.80 on your purchase. (Why Strict stop loss of 8 % ?) - Click Here

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

VIEW THE POWER POINT PRESENTATION ON

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