PVR shares may give up to 63% return in long term, say brokerages. Should you buy?
2 min read 15 Mar 2023, 05:23 PM ISTDuring the day, shares of PVR rallied as much as 3 per cent to ₹1,574.95 following the company's first investor call post-merger
PremiumIn light of the merged entity of PVR-INOX, which commands a share of 43 per cent in multiplex screens and 50 per cent-plus in multiplex box office, improving line-up of Hindi movies and a strong pipeline for the overall cinema industry in FY24, most brokerage houses remain upbeat on the stock.
During the day, shares of PVR rallied as much as 3 per cent to ₹1,574.95 following the company's first investor call post-merger. The stock closed 0.94 per cent higher at ₹1,542.05 apiece on Wednesday.
The stock hit its 52-week high of ₹2,211.55 on 4 August. As of 15 March, the stock is down 30 per cent from its one-year peak.
Brokerage house Nuvama Institutional Equities reiterates its positive stance on multiplexes over medium/long term. The brokerage a 'buy' rating on the stock with a target price of ₹2,125, implying a 39 per cent upside potential from the stock's current levels of ₹1,530.
The brokerage firm said the merged entity has created a "must-have consumption story" and that it will drive an annual EBTIDA margin synergies of ₹250 crore over 12–24 months.
The merged PVR-INOX entity currently has 1,642 screens and is looking to add 180–200 screens every year. "Supply chain Integration, reduction in duplicate costs, leveraging scale for volume discount and standardisation of products shall improve opex and capex synergies," Nuvama said.
What other brokerages say about PVR stock
BOFA and CLSA: Meanwhile, global brokerages BOFA and CLSA both have a ‘buy’ rating on the stock amid strong commentary from PVR’s management. BOFA has set a target of ₹2,405 per share (57 per cent upside) and CLSA believes the stock would grow to ₹2500 per share (63 per cent upside).
Sharekhan by BNP Paribas: Sharekhan by BNP Paribas maintains a 'buy' rating on the stock with a revised target price of ₹1800, based on FY25 EV/EBITDA of 11 times on merged entity EBITDA estimate of ₹1700 crore, given the likelihood of synergy benefits on revenues and cost front over the medium term, promising content pipeline and potential market share gains from penetration in tier 2-3 regions.
Prabhudas Lilladher: Brokerage firm Prabhudas Lilladher also has a 'buy' call on PVR with a target price of ₹2,096, implying a 37 per cent upside. It has increased its pre-IND AS (pre-India accounting standard) EBITDA estimates for the merged entity by 7 per cent and 7.5 per cent for FY24 and FY25, respectively, as it expects synergy benefits of about ₹200 crore to accrue over the next two years.
Motilal Oswal: Motilal Oswal has a neutral rating on the stock with a target price of ₹1,570. "The rich valuation the company commanded historically has contracted, given the slower recovery and risk posed by OTT players. We value the merged entity at 9 times FY24 EV/EBITDA and maintain our TP of ₹1,570," it said.
"With the completion of the merger, the management focus would now be directed toward integration of business operations and working synergies optimization across both revenue and costs items," the brokerage said.
This includes synchronization of pricing and SPH of both brands, improving Spend per Head (SPH) from the current 50 per cent, leveraging scale to improve advertising revenues, elimination of duplicate overheads, improved supply chain utilization, rationalizing F&B costs, etc.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
