Most landlords’ waived rents; costs down 75% – PVR

Update on the Indian Equity Market: On Thursday, NIFTY closed in green at 12,120 (+1.8%). Top gainers in NIFTY50 were IndusInd bank (+6.2%), Hindalco (+6.0%), and SBI (+5.6%). The top losers were Hero Motocorp (-0.6%), and HDFC Life (-0.2%). Top sectoral gainers were METAL (+4.4%), MEDIA (+4.0%), and PSU BANK (+2.9%) and the only sectoral loser was REALTY (-0.5%).

Excerpts of an interview with Mr. Nitin Sood, CFO, PVR with CNBC dated 4th November 2020:

• Multiplex chain PVR managed to reduce losses in the second quarter despite nil revenues from the core movie exhibition business with the exception of one property in Colombo.
• The big focus for them right now as revenues have been nil is to really reduce their fixed cost and they have managed to do that.
• They have brought down their fixed cost down by almost 75-80 percent. One of the big success that they have also managed to achieve is also to speak to their landlord partners and they have been able to get rent waivers from most of their landlords for the period they have been shut.
• Further cost reductions were not possible, but there was enough liquidity on the company’s balance sheet for now.
• The next major milestone would be the opening up of screens in Maharashtra, which accounts for roughly 25 percent of multiplexes’ revenues.
• Maharashtra is a very key state for Hindi film releases because it contributes about 20-25 percent of the revenue of Hindi films. They are hoping that they will get permission soon to open in Maharashtra.
• Maharashtra government has been wary of opening up of cinema halls, fearing a fresh outbreak of COVID cases, especially with the festive season underway.
• Mr. Sood said the first 6-8 weeks after reopening is expected to be challenging.

Consensus Estimate: (Source: market screener and investing.com websites)
The closing price of PVR was ₹ 1,227/- as of 5th November 2020. It traded at -12x/ 43x/ 20x the consensus earnings estimate of ₹ -105/ 28.6/ 60.7 for FY21E/22E/23E respectively.
The consensus price target of PVR is ₹ 1,359/- which trades at 22x the earnings estimate for FY23E of ₹ 60.7 /-.
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