PVR gains as ICICI Prudential and SBI Mutual Fund pick up Warburg Pincus’ stake

Analysts have a consensus target price of 2,022 on the stock, which indicates a 31 percent upside from the current levels

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Shares of PVR opened higher on March 21 after ICICI Prudential Mutual Fund and SBI Mutual Fund increased their stake in the multiplex giant. At 9:30 am, the stock was quoting at Rs 1574.05 on the NSE, up 1.8 percent from previous close.

The funds on March 20 picked up Warburg Pincus-affiliate Berry Creek’s 2.49 percent stake in PVR. In fact, these two funds are already heavily invested in the stock. As of February end, ICICI Prudential held 7.9 percent stake in PVR while SBI MF held 9.7 percent, shows data compiled by Prime Database.

Societe General was also one of the buyers.

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With almost 1,650 screens to its name, the combined entity of PVR-INOX is now the fifth-largest multiplex chain in the world. Commanding a 30 percent share in net-box office collections, PVR-Inox will have unmatched pricing power when it comes to ticketing as well as advertising. It is now a consumption story which is too big to ignore, believe analysts.

The management has also guided for annual EBITDA synergies of Rs 225 crore over the next 12-24 months. Majority of this will come in the food and beverages segment, where the company is clocking higher annual sales than even Restaurant Brands Asia (or Burger King India).

The combined entity clocked F&B sales of Rs 1,525 crore last year while Restaurant Brands Asia clocked Rs 1,343 crore.

Also Read: World’s 5th largest multiplex chain now also a fast food giant: Should you bet on PVR-Inox?

“The company shall take various steps in order to reduce F&B costs, such as leveraging scale, and reducing wastage and uniform product specification,” according to Nuvama Institutional Equities’ Abneesh Roy.

On back of these positive triggers, analysts have a consensus target price of 2,022 on the stock, which indicates a 31 percent upside from the current levels.

“PVR has traded at valuations of 14-14.5x on an average on forward EV/EBITDA basis (pre-COCIS), when Hindi content cycle has been favourable. The merged company is now trading at compelling valuations of 9.5x FY25 EV/EBITDA,” according to Elara Capital’s Karan Taurani.

With synergies coming into play, the merged entity could potentially trade at a valuation multiple of 14x, he believes, and has a target price of Rs 2,600 on the stock.?

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