BNB Paribas sells over 4.05 lakh shares in PVR in block deal. Should you invest?

BNB Paribas offloaded more than 4.05 lakh equity shares in PVR Limited, operator of a movie theater chain in India, on Thursday. However, PVR shares were unaffected today and witnessed an upsurge. Overall, during the day, PVR shares climbed by over 1.5% on Dalal Street. In a year, PVR shares have skyrocketed by over 39% on exchanges. The majority of analysts have given a ‘buy’ rating on the shares post-June 2022 quarterly results on the back of strong footfalls and better pricing. The company targets to add 120-125 screens in the current financial year.

As per BSE block deals, BNB-backed BNB Paribas Arbitrage sold 405,183 equity shares in PVR at ₹1,841.14 per equity share.

The transaction is around ₹74.6 crore in PVR.

According to the shareholding pattern, as of June 30, 2022, BNB Paribas Arbitrage held 7,51,390 equity shares or 1.23% in PVR.

On BSE, PVR shares ended at ₹1841.15 apiece up by ₹11.70 or 0.64%. The shares have hit an intraday high of ₹1857.30 apiece – resulting in a rise of over 1.5% in the day.

The company’s market cap is around ₹11,245.03 crore.

In a year, PVR shares skyrocketed by 39.24% on D-Street. The shares were around ₹1,322.25 apiece on August 25 last year.

Should you invest in PVR shares?

In June 2022 quarter, PVR posted a consolidated net profit of ₹53.38 crore compared to a net loss of ₹219.44 crore in Q1FY22 and a loss of ₹107.41 crore in Q4 of the previous fiscal. Revenue stood at ₹981.40 crore in Q1FY23 against ₹59.39 crore in the same period last year, and ₹537.14 crore in Q4FY22.

In its report last month, analysts at Sharekhan said, “PVR witnessed sharp recovery in revenue, EBITDA and net profit during Q1FY2023, led by a strong recovery in footfalls and better pricing. The company witnessed strong growth of 23% in ATP at Rs. 250 and 32% growth in average SPH at Rs. 134 as compared to the pre-pandemic period (Q1FY2020).” adding, “the company has aggressive plans to add 120-125 screens in FY2023, higher as compared to any pre-pandemic year. Though PVR’s cost per screen in Q1FY23 was 2% below compared to the cost per screen in Q1FY20, we believe higher wage inflation and rising energy prices would increase the fixed cost per screen to the pre-pandemic level in FY2023.”

On valuation, the brokerage house said, “We believe that PVR is well-poised to deliver strong growth in FY2023E given huge content pipeline, strong consumer demand, and success of dubbed Southern movies across the country. Further, the advantage of premium locations and ability to maintain industry-leading pricing are likely to aid its growth momentum. Further, the proposed PVR-INOX Leisure merger is expected to bring in enhanced productivity, deeper reach in newer markets, and cost-optimisation opportunities.” Hence, they added, “we maintain our Buy rating on PVR with an unchanged price target (PT) of Rs. 2,250.”

Giving a Buy target, analysts Jaykumar Doshi and Umang Mehta at Kotak Institutional Equities said, “The merger with INOX offers ~30% upside from current levels led by (1) ~15% EBITDA upside driven by merger synergies, and (2) ~10% valuation re-rating. We raise PVR’s FV to Rs2,200 capturing ~50% of this optionality (FV of PVR ex-merger is ~Rs1,900/share at 12.5X Sep-24E EV/EBITDA and merger can add about Rs600/share). Any objection from CCI is a risk to our call.”

Meanwhile, Edelweiss Wealth Research in their report said, “With normalization setting in, PVR has achieved highest ever ATP and SPH, thereby resulting in EBITDA margins surpassing pre-Covid levels. We expect PVR to continue the growth momentum, led by strong content pipeline and improvement in the footfalls.”

The June quarter saw blockbuster movies such as KGF2 (23% of PVR’s box office collection) and RRR doing better than expected. Going forward, Edelweiss report said, “there is a strong slate of big budget movies big budget such as Shamshera, Lal Singh Chaddha, LIGER to hit the screens over the next 6 months, which would help PVR achieve strong revenue growth.”

“We continue to remain positive on multiplex theme amid visible shift from OTT platforms to multiplexes (especially for big budget movies) and with window gap between theatrical release and OTT platforms resorting back to 8 weeks with effect from 1st August, 2022,” Edelweiss report added.

With improved performance, Edelweiss analysts in the report said, “we have increased our earnings estimates for PVR by ~5% and value it at 9x FY24E EV/EBITDA.” They have reiterated ‘Trading BUY’ on PVR and increase target price to ₹2,340/share.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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