A strong movie pipeline is always helpful for the multiplex business. Thankfully, for some time now, content has been good. In fact, for the recently released Ek Tha Tiger, ticket prices were raised 15-25% in anticipation of strong demand. According to a news report in Mint earlier this month, prior to the movie’s release, PVR Ltd, too, raised prices by 15-25% based on geography.

Incidentally, PVR has also done well both on the bourses and operationally in the recent past. The company had delivered strong financial results in the June quarter after a disappointing March quarter. Analysts expect the current quarter to be decent, too. In the June quarter, total consolidated revenue had increased sharply by 51% on a year-on-year (y-o-y) basis. That compares favourably with 31% revenue growth seen in the March quarter.

One key reason for the robust revenue growth seen last quarter is because of the strong performance of its movie production and distribution segment. The business performed well due to better-than-expected performance of its last release, Shanghai. The June quarter also saw an improvement in operating profit margin, both sequentially and y-o-y. Reported net profit, however, declined by 51% compared with the same period last year to 7.5 crore. That’s because of a one-time item last year.

Barring that, operationally, the company has performed well on many metrics in the last quarter. What’s also notable is that the PVR stock has performed well and delivered good returns to shareholders in the last one year.

What’s the outlook? Expansion in its multiplexes and bowling alley business is expected to drive revenue growth in the days to come. The company plans to add 80 new screens in fiscal year 2013 and expects a growth of 35% in revenue, said a recent analyst report. PVR had earlier announced its intention to exit its movie production business after Shanghai, which will make cash flows more predictable. Further, expected increase in footfall and good content augur well.

While the outlook seems bright, the hitch is that valuations already seem to be reflecting most of the positives. At 181, the stock trades at 13 times its estimated earnings for the current fiscal. Near-term upsides appear limited.

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