2QFY2013 Result Update | Media

November 9, 2012

PVR
Performance Highlights
Quarterly Performance (Consolidated)
(` cr) Revenue EBITDA OPM (%) Adj. PAT 2QFY13 189 36 19.0 16 2QFY12 138 28 20.2 14 % yoy 37.4 28.8 (126)bp 13.4 1QFY13 169 34 20.0 8 % qoq 11.8 6.0 (104)bp 112.8

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Media 679 154 0.7 240/116 16,795 10 18,684 5,686 PVRL.BO PVRL@IN

`235 12 Months

Source: Company, Angel Research

For 2QFY2013, PVR posted an impressive top-line growth of 37.4% yoy to `189cr mainly on account of a 37.8% yoy growth in its movie exhibition business to `176cr. On the bottom-line front, PVR reported a healthy 13% yoy growth in adjusted profit to `16cr in spite of 126bp yoy contraction in OPM to 19.0%. The reason for OPM contraction is the impact of service tax on lease rentals to the tune of `2.5cr booked in the quarter and increase in expenses on account of film distribution share, up by 45.7% yoy to `51cr (since higher number of movies were distributed in the quarter -7 vs 5 in 2QFY2012). Key highlights: PVR recorded an 11% yoy growth in footfalls to 7.5mn for comparable properties. Overall, footfalls grew by 29% yoy to 8.7mn aided by robust seat additions over the last few quarters. The average ticket price (ATP) grew by 11% yoy to `169. The healthy growth in footfalls and ATP led to a 39% yoy increase in ticket sales to `117cr. Amongst other segments, sale of food and beverages (F&B) registered a growth of 50% yoy to `37cr as the company is experimenting with various schemes such as flexi food prices. Advertisement income grew by 14% yoy to `19cr while bowling alley income grew by an impressive 134% to `9cr (albeit on a smaller base). Outlook and valuation: For FY2012-14E, we expect PVR to register a ~20% CAGR in its top-line, aided by robust seat additions. At the CMP of `235, the stock is trading at 12.6x FY2014E EPS. We believe the stock is richly valued and offers limited upside from the CMP. Hence, we maintain a Neutral view on the stock. Key financials (Consolidated)
Y/E March (` cr) Net sales % chg Net profit (Adj.) % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 40.2 14.1 11.0 34.7

Abs. (%) Sensex PVRL

3m 6.4 27.0

1yr 7.6 58.8

3yr 13.2 85.1

FY2011

FY2012

FY2013E

FY2014E

459 37.5 8 503.9 19.3 3.0 78.1 1.9 2.5 3.7 1.4 7.8

509 10.8 25 211.1 14.7 9.8 24.0 2.1 8.1 7.2 1.4 10.2

682 34.0 45 78.1 17.3 16.6 14.1 2.2 14.9 13.5 1.2 7.4

786 15.3 51 11.7 16.9 18.6 12.6 1.9 14.6 13.5 1.0 6.4
Amit Patil 022-39357800 Ext: 6839 amit.patil@angelbroking.com

Please refer to important disclosures at the end of this report

PVR | 2QFY2013 Result Update

Exhibit 1: Quarterly Performance (Consolidated)

Y/E March (` cr) Net Sales Film Distributor Share (% of Sales) Movie Dist/Print Chgs (% of Sales) Consumption of F&B (% of Sales) Staff costs (% of Sales) Rent (% of Sales) Other expenditure (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation Other Income PBT (excl. Ext Items) Ext Income/(Expense) PBT (% of Sales) Provision for Taxation (% of PBT) Recurring PAT Minority Interest Reported PAT PATM Equity shares (cr) FDEPS (`)
Source: Company, Angel Research

2QFY13 189 51 26.8 3 1.5 13 7.1 17 9.0 26 13.6 44 23.1 153 36 19.0 5 9 2 23 0 23 12.4 7 31.1 16 (0) 16 8.5 3 6

2QFY12 138 35 25.2 6 4.2 9 6.7 14 9.9 17 12.3 30 21.5 110 28 20.2 4 8 4 20 0 20 14.8 6 30.0 14 (0) 14 10.3 3 5

% yoy 37.4 45.7 (50.2) 46.4 25.4 51.6 47.4 39.5 28.8 35.8 13.7 (60.0) 14.9 19.3 13.4 13.4

1QFY13 169 38 22.5 11 6.3 12 6.8 17 9.9 23 13.4 36 21.2 135 34 20.0 5 18 1 12 0 12 7.1 4 34.8 8 (0) 8 4.5 3

% qoq 11.8 33.2 16.3 2.0 13.7 21.7 13.3 6.0 10.4 (50.4) 109.9

1HFY13 358 89 24.7 13 3.8 25 7.0 34 9.5 48 13.5 79 22.2 288 70 19.4 10 27 3 35 0

1HFY12 256 64 24.9 8 3.2 17 6.4 28 10.8 32 12.4 58 22.7 206 50 19.5 9 20 5 26 12 39 15.1 10 25.7 17 1 30 11.6 3 11

% chg 39.6 38.4 61.5 50.8 22.8 51.6 36.3 39.7 39.3 15.2 31.6 (53.9) 33.9 (8.4) -

95.6 74.8 112.8 112.8

35 9.9 11 32.4 24 (0) 24 6.6 3

(20.3)

13.4

113

(20.3)

Robust top-line growth

PVR posted an impressive top-line growth of 37.4% yoy to `189cr mainly on account of 37.8% yoy growth in its movie exhibition business to `176cr. The company recorded a robust growth in the movie exhibition business on the back of good performance by Hindi movies such as Ek tha Tiger, Bol Bachchan, Barfi, OMG and Cocktail, among others. PVR recorded an 11% yoy growth in footfalls to 7.5mn for comparable properties. Overall, footfalls grew by 29% yoy to 8.7mn aided by robust seat additions over the last few quarters. The ATP grew by 11% yoy to `169. The healthy growth in footfalls and ATP led to a 39% yoy increase in ticket sales to `117cr.

November 9, 2012

PVR | 2QFY2013 Result Update

Exhibit 2: Top-line growth driven by higher footfalls and ATP

200 180 160 140 120 100 80 60 40 20 49.2 17.1 14.6 1.4 2.5 2.7 32.9 37.4 44.6 60.0 50.0 40.0 30.0 20.0 134 133 117 138 137 117 169 189 88 10.0 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 (%) 19.5 (68.6) 19.3 0.0 12.5 87.3 18.4 10.5 95.6

(` cr)

Top-line (LHS) Source: Company, Angel Research

YoY growth (RHS)

Amongst other segments, sale of F&B registered a growth of 50% yoy to `37cr as the company is experimenting with various schemes such as flexi food prices. Advertisement income grew by 14% yoy to `19cr while bowling alley grew by an impressive 134% to `9cr (albeit on a smaller base).

Exhibit 3: Segmental revenue

(` cr) Segment Revenues Movie Exhibition Movie Prodn and Dist Bowling Alleys Inter Segment Total Income Segment Results Movie Exhibition Movie Prodn and Dist Bowling Alleys Inter Segment Total Finance Cost(Net)/Dividend Exceptional Items Profit/(Loss) before tax
Source: Company, Angel Research

2QFY13 176.1 7.2 8.7 (2.2) 189.8 26.4 1.2 0.4 (0.2) 27.7 4.3 0.0 23.4

2QFY11 127.8 8.4 3.7 (1.5) 138.4 20.2 1.1 0.4 (0.0) 21.7 1.3 (0.0) 20.4

% yoy 37.8 (14.0) 133.9 0.0 37.2 30.6 2.7

1QFY12 147.5 23.0 7.3 (9.0) 168.7 14.1 1.0 1.0 (0.2) 15.9

% qoq

236.7 14.8

3.9 0.0 12.0

November 9, 2012

PVR | 2QFY2013 Result Update

Healthy Profit growth in spite of OPM contraction

PVR reported a healthy 13% yoy growth in adjusted profit to `16cr in spite of a 126bp yoy contraction in OPM to 19.0%. One of the reasons for OPM contraction is the impact of service tax on lease rentals to the tune of `2.56cr booked in the quarter. The Multiplex Association of India has challenged the order to levy service tax and the matter is pending in the Supreme Court. If the outcome of the case is in favor of multiplexes, then the amount will be refunded. The expenses on account of share of revenue from film distribution increased by 45.7% yoy to `51cr since a higher number of movies were distributed in the quarter (7 vs 5 in 2QFY2012), which further contributed to margin erosion.

Exhibit 4: OPM contracted 126bp yoy

40 35 30 25 (` cr) 20 15 10 33 21 17 20 28 22 5 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3.6 34 36 4 15.8 24.5 19.4 17.1 20.2 16.3 20.0 19.0 30.0 25.0 20.0 15.0 10.0

Exhibit 5: Healthy growth in Adjusted Profit

20 15 10 (` cr) (%) 5 (5) 5.0 (10) (15) 2Q11 3Q11 (13) 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 (2) 10 14 9 2 8 16

EBITDA (LHS)

OPM (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Investment rationale
De-risked business due to various entertainment offerings: PVR is present across the movie value chain (exhibition-production-distribution) and has forayed into retail entertainment through PVR Blu-O, which is expected to show strong growth going ahead. PVRs earnings are expected to register a ~20% CAGR over FY2012-14E on incremental earnings from its newly opened properties and an impressive movie pipeline. Set for expansion: PVR has ambitious plans to open 82 new screens and 80 bowling lanes this year. The company has also tied up with L Capital Eco Ltd. According to the deal, L Capital Eco will invest `108cr in PVR which will support PVRs expansion plans of setting up upto 500 screens across the country in the next few years.

November 9, 2012

PVR | 2QFY2013 Result Update

Outlook and valuation

For FY2012-14E, we expect PVR to register a ~20% CAGR in its top-line, aided by seat additions. At the CMP of `235, the stock is trading at 12.6x FY2014E EPS. We believe the stock is richly valued and offers limited upside from the CMP. Hence, we maintain a Neutral view on the stock.

Exhibit 6: Return of PVR vs Sensex

140% 120% Sensex PVR

Exhibit 7: One-year forward P/E band

250 200 3x 6x 9x 12x

Share Price (`)

Dec-10 Dec-11 Jun-10 Jun-11 Aug-10 Aug-11 Jun-12 Aug-12 Apr-11 Apr-10 Oct-10 Oct-11 Apr-12 Feb-11 Feb-12 Oct-12

100% 80% 60% 40% 20% 0%

150 100 50 0

Feb-11

Dec-10

Dec-11

Feb-12

Jun-11

Aug-11

Jun-12

Aug-12

Apr-11

Oct-10

Oct-11

Apr-12

Source: Company, Angel Research

Source: Company, Angel Research

Company Background
PVR is one of India's leading multiplex cinema operators. The company is the pioneer of the multiplex culture in the country, as it was the first to establish a multiplex cinema in India, PVR Anupam, in Saket, Delhi, in 1997. The company is also present in the entertainment space through PVR Blu-O bowling alleys.

November 9, 2012

Oct-12

PVR | 2QFY2013 Result Update

Profit & loss statement (Consolidated)

Y/E March (` cr) Gross sales Less: Excise duty Net Sales Total operating income % chg Total Expenditure Direct Cost SG&A Expenses Personnel Others EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Prior Period & Extra Exp/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earn of asso Less: Minority interest (MI) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg
previous year numbers

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 352 352 352 32.4 305 134 40 38 93 47 (3.4) 13.4 35 12 (62.6) 3.4 13 12 11 (66.8) 0.0 11 3 23.9 8 (0.4) 9 9 (59.7) 2.5 3.7 3.7 334 334 334 (5.1) 300 119 32 42 107 34 (27.5) 10.2 27 7 (43.0) 2.0 16 10 1 0.0 1 (0) (14.6) 1 (0.5) 1 1 (84.5) 0.4 0.5 0.5 459 459 459 37.5 371 156 49 47 118 89 159.0 19.3 67 21 213.0 4.6 16 11 67.8 16 0.0 16 15 98.0 0 (7.9) 8 8 503.9 1.8 3.0 3.0 509 509 509 10.8 434 174 51 56 152 75 (15.4) 14.7 36 39 81.4 7.6 18 13 43.0 31 97.4 2.4 31 6 18.5 25 0.1 25 25 207.9 4.9 9.8 9.8 682 682 682 34.0 564 243 78 75 168 118 57.1 17.3 43 74 93.1 10.9 22 13 19.5 65 108.6 0.0 65 19 30.0 45 45 45 80.0 6.6 16.6 16.6 786 786 786 15.3 653 276 89 86 202 133 12.5 16.9 48 85 14.3 10.8 20 13 16.2 78 20.3 0.0 78 27 35.0 51 51 51 11.7 6.4 18.6 18.6

106.0 1,395.3

(93.6) 2,140.7

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

November 9, 2012

PVR | 2QFY2013 Result Update

Balance sheet (Consolidated)

Y/E March (` cr)
SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability 23 246 269 61 147 16 493 325 115 116 8 86 22 63 53 0 493 26 283 309 60 180 17 566 386 107 132 21 93 18 59 73 0 566 27 314 341 54 162 31 589 421 1 234 79 119 35 67 167 0 589 30 254 283 14 180 11 488 387 1 225 25 166 35 126 100 488 30 294 324 14 263 11 611 486 1 218 (4) 167 55 92 126 611 30 340 370 14 248 11 642 488 1 258 5 190 63 103 155 642 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

Total Liabilities
APPLICATION OF FUNDS Net Block (incl CWIP) Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off

Total Assets
previous year numbers

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

Cash flow statement (Consolidated)

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Interest / Dividend (Net) Direct taxes paid Others Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Interest / Dividend (Net) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances
previous year numbers

FY2009 FY2010 FY2011 11 35 (3) 5 3 (9) 36 (69) (85) (154) 113 12 3 10 112 (6) 15 8 1 27 (7) 11 (0) (3) 29 (85) 8 (77) 41 33 3 11 60 12 8 21 16 67 (24) 11 15 (11) 44 (61) 89 28 20 (18) 3 11 (13) 58 21 79

FY2012 FY2013E FY2014E 31 36 (14) 14 6 (32) 30 (3) 17 15 (98) 18 5 14 (99) (55) 79 25 65 43 (44) 18 19 (10) 52 (142) 0 (142) 83 5 18 61 (29) 25 (4) 78 48 (14) 15 27 (6) 94 (50) 0 (50) (15) 5 15 (35) 9 (4) 5

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

November 9, 2012

PVR | 2QFY2013 Result Update

Key ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Int. Coverage (EBIT / Int.)
previous year numbers

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E 63.1 12.3 2.0 0.4 1.9 15.8 1.5 3.7 3.7 19.1 1.0 116.8 3.4 0.8 1.2 3.1 0.1 0.3 3.9 2.8 3.2 3.6 1.0 3 19 61 46 0.1 0.5 0.9 445.2 20.9 1.9 0.4 2.1 22.4 1.4 0.5 0.5 11.2 1.0 120.6 2.0 1.1 0.9 2.1 0.1 0.1 2.3 1.3 1.5 0.5 0.9 4 16 59 57 0.2 1.5 0.4 78.1 8.4 1.9 0.4 1.4 7.8 1.2 3.0 3.0 27.8 1.1 125.7 4.6 0.0 1.2 0.1 0.1 0.2 0.1 3.7 4.2 2.5 1.2 4 22 44 121 0.2 0.9 1.3 24.0 9.8 2.1 0.6 1.4 10.2 1.6 9.8 9.8 23.9 1.5 109.4 7.6 0.8 1.3 7.8 0.1 0.4 10.8 7.2 8.3 8.1 1.2 4 19 78 65 0.5 2.1 2.1 14.1 7.9 2.2 0.6 1.2 7.4 1.4 16.6 16.6 29.7 1.4 108.4 10.9 0.7 1.6 12.0 0.1 0.7 20.1 13.5 12.1 14.9 1.5 4 23 41 60 0.8 2.3 3.3 12.6 7.2 1.9 0.6 1.0 6.4 1.3 18.6 18.6 32.8 1.4 123.8 10.8 0.7 1.6 11.6 0.1 0.7 20.0 13.5 13.4 14.6 1.6 4 23 41 65 0.7 1.8 4.3

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

November 9, 2012

PVR | 2QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

PVR No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

November 9, 2012