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  • Stock recommendation: PVR — Buy — Target price Rs 1,360

    Publish date: August 7, 2018

    A masterstroke

    PVR has got out of a sticky situation by launching attractive food and beverage (F&B) offerings and renewing two big deals.

    The multiplex chain was facing potential F&B revenue losses because the Maharashtra government had proposed to allow moviegoers to carry outside food into the multiplexes a few weeks back. But a swift and timely intervention has allowed PVR to provide food and drinks at a lower rate.

    Furthermore, the company has renewed its deals with BookMyShow and PayTM for three years. It expects to receive at least Rs 4.1 billion from the two deals, which will help improve the EBITDA and net debt figures.

    Key Highlights

    • PVR will receive an upfront amount of Rs 3.5 billion from the two recently-renewed deals. One of the ways they will benefit from this is that both PayTM and BookMyShow have agreed to increase PVR’s share of the convenience fees from Rs 14 per ticket to Rs 22 per ticket.
    • To give you a perspective about the large-scale nature of the two deals, PVR received Rs 1.3 billion as convenience fees between FY2015-18. But over the next three years, the company will receive Rs 3.6 billion, an almost three-fold jump.
    • One of the reasons for the massive jump in earnings are because BookMyShow and PayTM depend a lot on PVR. Plus, PVR’s consumer base is very high.

    Valuation & outlook

    The alacrity with which the management has moved to ward off any revenue dent is laudable. We believe that the swiftness in decision-making and renewal of two major deals will help the company improve its EBITDA margins and reduce its net debt.

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