PVR’s diversified Business Model and presence across the Movie value chain (Exhibition-Production-Distribution) places it in a better position than its peers to combat the prevailing economic slowdown.
We expect its new ventures like Food Courts and Bowling Alleys to capitalise on large flow of footfalls in multiplexes, thereby aiding topline growth.
During 1QFY2009, PVR diluted 40% equity stake in PVR Pictures for Rs120 crore valuing the production and distribution businesses at Rs300 crore.
PVR Pictures is still sitting on Rs100cr un-deployed cash and plans to produce/distribute 7-8 movies in FY2010E. We believe cost rationalisation and execution in terms of movie selection / acquisition will remain the key for PVR to make this venture profitable.
While entry in new businesses like Gaming (Blu-O) and Production (PVR Pictures) is likely to aid PVR’s overall topline growth, initial investments and a weak macro-economic environment are likely to delay breakeven of these ventures.
At Rs86, PVR is trading at 10.9x FY2010E EPS of Rs7.9. Given the recent run up in the stock and near-term concerns, we maintain NEUTRAL view on the stock.