PVR’s net profit was below estimate, primarily due to higher depreciation in Q3FY13
PVR’s Q3FY13 revenue and EBITDA surpassed Edelweiss’ estimates; however, net profit was below estimate, primarily due to higher depreciation (up 43% year-on-year due to two new big properties in Orion Mall, Bengaluru, and Phoenix Market City, Kurla, Mumbai), high interest costs (up 77% year-on-year on high debt due to Cinemax acquisition) and higher tax rate (38.5%). These are the observations of Edelweiss analysts on the third quarter results of PVR in FY13.
Key positives were:
(a) huge 7% year-on-year jump in average ticket price (ATP) for comparable properties to Rs181;
(b) 37% year-on-year rise in footfalls;
(c) 13% year-on-year surge in spends per head to Rs49; and
(d) 18% year-on-year spurt in ad revenue.
Though Edelweiss expects PVR to benefit from Cinemax’s acquisition due to synergy benefits, it is fairly conservative in its estimates. Increased focus on being a lifestyle company augers well. Edelweiss maintains a ‘BUY’ recommendation for the share of PVR on the stock exchange.
Riding on higher ATP, 49% year-on-year increase in food and beverage revenue and 18% jump in ad revenue (like-to-like), PVR’s exhibition revenue grew a robust 46.2% year-on-year to Rs1,874 million. Rent expenses surged 60% year-on-year due to increase in screens and service tax provision on lease rentals of Rs34.5 million in Q3FY13. This, coupled with a 51% year-on-year increase in film distributors’ share and other movie related charges, led to 55 basis points year-on-year drop in EBITDA margin to 17%. In spite of EBITDA growth of 39% year-on-year, new profit grew just 1.4% year-on-year due to jump in interest and depreciation costs.
PVR added 47 screens in 9 months of FY13 and plans to add 102 screens in next eight months. Post the Cinemax deal, it will be the largest multiplex operator in India with more than 350 screens, well ahead of peers. Its consolidated debt as of date is Rs6 billion.
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