PVR a long-term buy on rising advertising, Food & Beverages revenues

Long-term investors may hold on to the PVR stock, India’s largest multiplex by screen count. Factors such as a lineup of large banner movies in the coming quarters, presence in prime locations which offers competitive advantage, rising advertising and food and beverages revenues, and clearance of DT Cinemas deal indicate superior revenue growth for the company.

Multiplex companies are no more considered as just another part of the entertainment sector. Given their consumer focus, analysts have started classifying these companies under the consumption theme. This is beneficial for the perceived valuation of PVR, which is an industry leader with close to 550 screens (25 per cent of the industry’s capacity) and presence in 47 cities across 17 states.

The average movie ticket price of Rs 178 charged by PVR is 5-6 per cent higher than peers. Given these factors, analysts believe that the company’s stock valuation can attract premium to its peers such as Inox Leisure.


In India, movies offer relatively cheaper option of entertainment compared with theatre and amusement parks. This augurs well for PVR, which accounts for 30 per cent of Hollywood box office collection in India and over 20 per cent of Hindi films collection.

The company’s advertising revenue grew at a compounded annual growth rate (CAGR) of 32 per cent in the past six fiscal years to Rs 214 crore. At present, advertising and food & beverages together contribute 36.1 per cent to its total revenues and in the coming years as the company’s screens mature in terms of operations, the share is expected to increase.

Another factor that is likely to drive growth in the coming quarters is the good line-up of films such as Sultan, Dangal, Mohenjo Daro, Rustom, Banjo, Rangoon, Shivaay, Ae Dil Hain Mushkil and Bifikre. In addition, a few Hollywood films such as Conjuring 2, The Legend of Tarzan, Minecraft and Popeye are likely to boost the box office collection.

Recently, the Competition Commission of India gave green signal to PVR’s acquisition of DT Cinemas. It will add 32 screens at prime locations to PVR’s current screen capacity.

At Friday’s price, the stock was valued 26x its FY18 expected earnings.