Exhibition segment stocks have faced the impact of a relatively weak movie release pipeline CYTD, trend of rising property rentals and concerns on delay in new property handovers from real estate developers.
While we believe occupancy rates will pick up Q2’09 onwards as content quality improves, we build in caution on the property handover front.
Its profitability will likely be at higher end of peer set, despite the mentioned medium term headwinds.
Margins are likely to be aided by better content leading to higher footfalls and the commissioning of its owned property. For PVR screen expansion plans remain on track, till now and new initiatives like movie production and F&B retailing remain in investment mode.
PVR remains a preferred exposure to the otherwise cluttered exhibition space given reasonable project execution thus far, diversification into the movie production business and its competitive positioning. We retain our BUY rating on the stock with a price target of Rs240 (Rs284 earlier).