Outlook Business — December 07, 2017

74

My Best Pick

22 December 2017 / Outlook BUSINESS

D

o you know which multiplex chain

in the country boasts of an envious

40 % share of Hollywood box offi ce

collections and 25 % share of Bolly-

wood box offi ce collections? It goes by the name of

PVR. In an industry, which is in the throes of con-

solidation on the back of a series of acquisitions, PVR

has emerged as the king in a four-player market with

Carnival, Inox and Cinepolis making up for the rest.

Given the limited competition, low screen density,

and diversifi ed content, PVR has tremendous growth

potential to unleash. With 600 screens, the Bijli

brothers-owned multiplex has the potential to grow

revenues 7 x and profi ts 10 x over the next 15 years.

This will be led by a combination of internal driv-

ers (screen launch in high-quality catchment, pric-

ing power, growth in ancillary revenues) and external

tailwinds (closure of single screens and the introduc-

tion of the Goods and Services Tax).

PRIME TIME

PVR fi nds itself in an industry where the competi-

tive dynamics are improving owing to increased rev-

enue for movies via digital distribution, market share

gain for multiplexes (relative to single screen cinema

halls), and diversifi ed content, with Hollywood and

regional cinema growing faster. The Indian box offi ce

continues to be dominated by local content and fran-

chises, unlike in China where Hollywood (dubbed) is

dominant. While demand for local themes and con-

tent continues to be strong, the share of Hollywood

content has gradually increased. Therefore, Indian

players such as PVR have lower content risk.

The multiplex major has the lowest competitive in-

tensity among other Indian discretionary compa-

nies. The inherent strength of locational advantage

and high occupancy levels give it more pricing power

than compared with players in the apparel and jew-

ellery space. These competitive advantages coupled

with diff erentiated experience drives customer will-

ingness to pay a premium.

Limited supply of quality multiplexes in densely

populated catchments means India has the lowest

screen density. But a strong movie watching culture

( 1 , 200 number of movies get released in a year) trans-

lates into occupancy levels that are the highest in the

country. These factors contribute to PVR having the

highest asset turn among listed peers, both local and

global. In fact, there is scope for improvement in as-

set turn, given PVR’s ability to raise average ticket

prices (ATP) as well as increase the share of ancillary

revenues from food and beverages (F&B). PVR’s F&B

spend per head, at 41 % of ATP, is at par with some of

the leading global exhibitors. However, it can go up to

50 % through menu innovations and meal off erings.

PVR currently off ers meal options such as pizza and

pasta in addition to snacks. These options are meal

replacements in a 150 -minute-long movie and have

been driving F&B spend.

Premium locations and higher share of ancillary

revenues ( 47 % in FY 17 ) in the form of advertising

King of entertainment

PVR has a dominant presence across the country

Region PVR Total

PVR market

share

PVR

rank

North 194 702 28% 1

South 125 462 27% 1

West 238 905 26% 1

East 22 131 17% 3

PVR’s premium positioning is

strong — more than 50% of its

screens are in top eight cities,

whose per capita GDP is seven

times that of India

Note: Market related data as on December 1, 2017; Financials

for FY17; Consolidated fi nancials considered wherever

applicable

Data: Ace Equity

Source: Analyst report

net sales#2 ,119cr

stock price#1 ,278 M-CAP#5 , 971cr

ROE 11.18%