Movie Buys – PVR

The multiplex industry is set to witness strong volume growth on the back of rising consumerism, entertainment tax exemptions, advent of organized retail and overall multiplex underpenetration in India. PVR’s dominant market share at the box-office, diversification into movie production and aggressive but selective geographical expansion plans bode well for the company’s prospects.

Through aggressive capacity expansion plans, PVR is looking at geographical diversification (beyond Delhi/NCR, its dominant pocket) and also target market broadening through its low – cost offering, PVR Talkies. PVR has aggressive expansion plans and intends to scale up its operations to 195 screens in FY09E and 248 screens by FY10E from the current 95 screens.

PVR has been looking at de-risking its business model by backward integrating in the movie value chain through its fully owned sub “PVR Pictures”. PVR’s entry into film distribution and production as integrated movie exhibition houses is a good move.

At current price levels of Rs.328 the stock is currently trading at 18x FY09E earnings. On an EV/EBITDA basis the stock is currently trading at 10x FY09E EV/ EBITDA. At target price of Rs 415 the stock will trade at 23x FY09E earnings and 12x FY09E EV/EBITDA, backed by an estimated 94% consolidated EPS CAGR over FY07-09E.