HSBC's Views on PVR Ltd are as follows,
PVR is likely to see a sturdy ramp-up in its movie exhibition business, on the back of a strong pipeline of movies due for release in the coming quarters. PVR’s strong presence across the value chain is expected to augment exhibition business and de-risk revenue streams. The company is planning to open about 50-60 cinema screens in FY11E with an investment of about Rs 1000mn and management expects to grow its revenues 30% during the year. The visibility in the production pipeline for PVR Pictures is looking better with the promising movies expected in 1HFY11.
We expect PVR to perform well on the back of strong growth in revenues and margins, mainly due to higher contribution expected from the new screens added last year. The exhibition business is extremely dependant on the availability of quality content, which was visible with the impacted first quarter FY10 due to producers’ strike. The diversification into production, distribution and entertainment centers augurs well for the company to strengthen its business model. The company expects to add 46 new screens in FY11E, which will fuel the growth engine in FY11 to FY12.
We expect the company to post EPS of Rs 10.8 and Rs 12.5 in FY11E and FY12E respectively. We have valued PVR 15x FY12E to arrive at a value of Rs 188, implying a potential return of 20.5%. We, thus maintain our Buy on PVR Limited
