Q4FY19: a Phenomenal Show!
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SECTOR UPDATE - MEDIA Q 4FY19: A Phenomenal Show! India Equity Research | Media Box office collections hit all-time highs in Q4FY19 with five, ‘non-Khan’, Bollywood movies crossing the coveted INR1bn mark - Uri (~INR2.4bn collection), Total Dhamaal (~INR1.55bn), Simmba (~INR1.4bn), Gully Boy (~INR1.4bn) and Kesari (~INR1.25bn). On the flip side, the quarter saw a face-off between producers and exhibitors over the virtual print fee (VPF), which threatens to be an overhang. Exhibitors are now focusing on innovations to differentiate themselves, which we believe will help them attract higher footfalls. However, we expect footfalls to be weak in Q1FY20 considering IPL, World Cup and general elections. We will watch out for: (1) VPF issue; (2) impact of Ind AS 116; (3) contagion risk of local body tax (LBT); and (4) OTTs’ aggression. Maintain ‘BUY’ on PVR. Multiplexes and producers battling on VPF payments \ Last month, Mr. Ronnie Screwvala had reportedly filed a complaint with CCI against top multiplex chains, over the virtual print fee (VPF) payments. VPF is typically charged ‘per- property’ by multiplexes on a ‘per-title (per movie) basis’, from the producers. Though, VPF income is a small portion of the overall revenue for multiplexes – less than 1% of PVR’s FY19E revenue in PVR’s case, the critical part is that the absence of VPF income will have a direct impact, though marginal, on EBITDA of the multiplexes. For PVR, VPF in FY18 was ~INR172mn, roughly ~4% of EBITDA. However, for INOX Leisure (INOX), VPF stood ~12% of the EBITDA. In case, CCI rules in favour of producers, we can expect a marginal hit on the multiplexes’ revenue and EBITDA respectively. However, the value at risk from VPF to the EBITDA is higher for INOX than PVR. Technology to become critical in driving footfall Recently, PVR and INOX signed deals to import ‘ScreenX’ technology to India, which allows a 270-degree movie viewing experience. Additionally, PVR will also be introducing India’s first D-Box motion seats to improve 4DX experience. We believe that such screens will largely be opened in metro cities where appetite for luxury format theatres has been higher and expect both multiplexes to continue to focus on premium offerings. We believe such measures will be conducive towards keeping multiplexes relevant in the value chain and mitigate risk from OTTs. Outlook: PVR to end FY19 on a high note; Q1FY20 to be leaner We estimate PVR’s revenue, EBITDA and PAT to grow ~42%, ~70% and ~85% YoY, respectively, in Q4FY19 (incl. SPI Cinemas), driven by robust box collections, footfall growth and uptick in F&B revenues. We expect ~22% footfall growth for PVR with ATP Abneesh Roy ~INR203, growing the net box office collections ~25% YoY (excl. SPI Cinemas). We +91 22 6620 3141 anticipate the SPH to inch up ~2% YoY to INR89, increasing the F&B revenue (excl. SPI [email protected] Cinemas) by ~28%. We expect Q1FY20 to be leaner for multiplexes, as producers Prateek Barsagade would prefer to release their movies once attention shifts from the cricketing season +91 22 4063 5407 (IPL and World Cup) and general elections. Though we maintain ‘BUY’ on PVR, we will [email protected] keep tabs on – 1) VPF issue; 2) impact of Ind AS 116; 3) contagion risk of LBT and 4) OTTs’ aggression (refer our note: OTTs to disrupt multiplex’s party?). April 9, 2019 Edelweiss Research is also available1 on www.edelresearch.com, Edelweiss Securities Limited Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. Media Table 1: Domestic box office collections in Q4FY19 Table 2: Domestic box office collections in Q4FY18 Total Total (INR mn) Day 1 Day 2 Day 3 Collections Movies (INR mn) Day 1 Day 2 Day 3 Collections Uri - The Surgical Strike 82 124 151 2,440 Padmaavat 240 320 270 3,021 Total Dhamaal 165 204 255 1,548 Sonu ki Titu ki Sweety 64 93 108 1,090 Simmba* 207 233 311 1,440 Raid 100 139 171 1,031 Gully Boy 194 131 187 1,396 Padman 103 137 161 818 Kesari 211 168 188 1,250 Pari 44 55 55 290 Manikarnika 88 181 157 952 Hate Story 4 38 42 47 224 Luka Chuppi 80 101 140 921 Aiyaary 34 41 44 182 Badla 50 86 96 818 1921 16 21 28 159 Total 10,763 Total 6,814 Source: boxofficecollection.in, Edelweiss research Note: *Simmba released on 28 Dec, 2018 collecting INR963mn in the first four days. Total collections garnered are INR2.4bn. Fig. 1: Gully Boy evinced good response from audience Fig. 2: Uri: The Surgical Strike had a blockbuster run in Q3FY19 Source: Industry, Edelweiss research Fig. 3: Avengers: Endgame slated for release on 26 April, 2019 Fig. 4: Avengers: Endgame slated for release on 17 April, 2019 Source: Industry, Edelweiss research Edelweiss Securities Limited 2 Sector Update Table 3: Q4FY19 – Movie line-up Rel Date Movie Language Distributor Director Cast 5-Apr-19 SHAZAM (IMAX 2D) ENGLISH WARNER BROS. 5-Apr-19 FIGHTING WITH YOUR FAMILY ENGLISH UNIVERSAL STUDIOS 5-Apr-19 RAW - ROMEO AKBAR WALTER HINDI KYTA PRODUCTIONS ROBBIE GREWAL JOHN ABRAHAM, JACKIE SHROFF, MOUNI ROY, SIKANDER KHER 5-Apr-19 NO FATHERS IN KASHMIR HINDI VKAAO 5-Apr-19 CHOUSAR FIRANGI HINDI SR ENTERTAINMENT SANDEEP PANDEY AMOL DESHMUKH, REKHA MISHRA, SARIKA NAYAK, PRATEEK PACHORI, POOJA PANDEY 11-Apr-19 PM NARENDRA MODI HINDI PANORAMA STUDIOS 12-Apr-19 PET SEMATARY ENGLISH VIACOM 18 12-Apr-19 HELL BOY (IMAX 2D) ENGLISH PVR PICTURES 12-Apr-19 ALBERT PINTO KO GUSSA KYON AAYA HINDI RUNAWAY LUMINOSITY 12-Apr-19 SETTERS HINDI 12-Apr-19 THE TASHKENT FILES HINDI 12-Apr-19 PAHARGANJ HINDI RAKESH RANJAN KUMAR LORENO FRANCO, BIJESH JAYARAJAN, RAJEEV GAURSINGH 12-Apr-19 GUN PE DONE HINDI 17-Apr-19 KALANK HINDI FOX STAR STUDIOS ABHISHEK VERMAN ALIA BHATT, VARUN DHAWAN, MADHURI DIXIT, SANJAY DUTT 19-Apr-19 THE CURSE OF LA LLORONA ENGLISH WARNER BROS. 26-Apr-19 LITTLE ENGLISH UNIVERSAL PICTURES TINA GORDON CHISM JUSTIN HARTLEY, MARSAI MARTIN 26-Apr-19 AVENGERS : Endgame (3D / IMAX 3D / 4DX) ENGLISH DISNEY 3-May-19 INTRUDER ENGLISH SONY PICTURES 3-May-19 UGLY DOLLS ENGLISH PVR PICTURES 3-May-19 AFTER ENGLISH PVR PICTURES 3-May-19 ARJUN PATIALA HINDI 3-May-19 BLANK HINDI CARNIVAL MOTION BEHZAD KAPADIA KARAN KAPADIA, SUNNY DEOL 10-May-19 POKEMON DETECTIVE PIKACHU ENGLISH WARNER BROS. 10-May-19 STUDENT OF THE YEAR 2 HINDI FOX STAR STUDIOS 10-May-19 CHHOTA BHEEM : KUNG FU DHAMAKA (2D & 3D) HINDI 17-May-19 THE SUN IS ALSO A STAR ENGLISH WARNER BROS. 17-May-19 THE HUSTLE ENGLISH UNIVERSAL PICTURES CHRIS ADDISON ANNE HATHWAY, REBEL WILSON, TIM BLAKE NELSON 17-May-19 JOHN WICK 3 ENGLISH PVR PICTURES 17-May-19 DE DE PYAAR DE HINDI 24-May-19 ALADDIN ENGLISH DISNEY 24-May-19 AD ASTRA ENGLISH FOX STAR STUDIOS 24-May-19 BRIGHT BURN ENGLISH SONY PICTURES JAMES GUNN 24-May-19 INDIA’S MOST WANTED HINDI FOX STAR STUDIOS RAJKUMAR GUPTA ARJUN KAPOOR 24-May-19 POWER HINDI 31-May-19 ROCKETMAN ENGLISH VIACOM 18 31-May-19 GODZILLA 2 (3D, IMAX 3D) ENGLISH WARNER BROS. 31-May-19 MA ENGLISH UNIVERSAL PICTURES 4-Jun-19 BHARAT HINDI SKF ALI ABBAS ZAFAR SALMAN KHAN, KATRINA KAIF 7-Jun-19 THE SECRET LIFE OF PETS 2 ENGLISH UNIVERSAL PICTURES 7-Jun-19 X-MEN : DARK PHOENIX (IMAX / 4DX) ENGLISH FOX STAR STUDIOS SOPHIE TURNER 14-Jun-19 MEN IN BLACK UNTITLED ENGLISH SONY PICTURES 14-Jun-19 THE ZOYA FACTOR HINDI FOX STAR STUDIOS ABHISHEK SHARMA DULQUER SALMAN,SONAM KAPOOR 21-Jun-19 TOY STORY 4 (3D) ENGLISH DISNEY 21-Jun-19 KABIR SINGH HINDI T-SERIES SANDEEP REDDY VANGA SHAHID KAPOOR 28-Jun-19 UNTITLED JAMES MANGOLD ENGLISH FOX STAR STUDIOS 28-Jun-19 YESTERDAY ENGLISH UNIVERSAL PICTURES DANNY BOYLE ED SHEERAN, ANA DE ARMAS, LILY JAMES 28-Jun-19 ANNABELLE 3 ENGLISH WARNER BROS. 28-Jun-19 DRIVE HINDI FOX STAR STUDIOS TARUN MANSUKHANI SUSHANT SINGH RAJPUT 28-Jun-19 SECTION 375 HINDI PANORAMA STUDIOS 28-Jun-19 MALAAL HINDI T SERIES MEEZAN JAAFERI, SHARMIN SEGAL Source: Industry, Edelweiss research 3 Edelweiss Securities Limited Media Table 4: PVR versus INOX – Quarterly comparison Quarterly comparison - Inox vs PVR PVR Inox (incl. SPI Cinemas) Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Net revenue (INR mn) 5,573 5,849 6,963 7,086 8,542 3,259 3,236 4,149 3,653 4,332 EBITDA (INR mn) 1,015 944 1,372 1,240 1,754 463 439 835 448 835 PAT (INR mn) 289 262 522 333 521 132 577 370 120 365 ATP (INR) 212 209 217 211 212 199 193 199 195 206 Net box office (INR mn) 2,931 3,124 3,849 3,739 4,254 1,879 1,895 2,419 2,064 2,429 Ad revenues (INR mn) 867 720 718 811 1,117 403 332 400 378 557 F&B revenue (INR mn) 1,438 1,571 2,027 1,954 2,167 731 777 1,114 949 1,063 Footfalls (mn) 17.4 19.0 22.7 21.4 25.8 12.1 12.6 15.6 13.7 15.3 No. of screens 612 625 634 727 748 488 492 512 536 557 SPH (INR) 92 87 94 88 89 70 67 76 73 74 Occupancy (standalone) (%) 29.1 31.5 35.9 33.4 33.0 24.0 26.0 29.0 25.0 27.0 F&B Gross Margin (Standalone) (%) 74.2 75.2 75.1 73.3 72.5 75.8 74.9 75.6 73.3 73.4 Zone wise screen break up (Consolidated) North 203 203 203 209 216 102 102 109 112 119 East 22 22 22 22 22 72 72 76 76 84 West 245 245 245 250 257 215 219 223 230 236 South 142 155 164 246 253 99 99 104 118 118 Total screens 612 625 634 727 748 488 492 512 536 557 Key metrics Ad revenues per screen (INR mn) 1.4 1.2 1.1 1.1 1.5 0.8 0.7 0.8 0.7 1.0 EBITDA margin (ex ad revenues) 3.2 4.4 10.5 6.8 8.6 2.1 3.7 11.6 2.1 7.4 EBITDA margin 18.2 16.1 19.7 17.5 20.5 14.2 13.6 20.1 12.3 19.3 ATP/SPH ratio (standalone) 2.3 2.4 2.3 2.4 2.4 2.8 2.9 2.6 2.7 2.8 Footfalls per screen ('000) 28.4 30.4 35.8 29.4 34.5 24.9 25.7 30.5 25.5 27.5 YoY growth (%) ATP 6.5 10.0 1.4 3.4 - 9.3 10.9 3.1 4.8 3.5 Net box office 7.7 18.1 12.1 24.9 45.2 6.5 6.0 1.1 11.2 29.3 Ad revenues 10.6 36.5 6.5 18.0 28.9 33.4 58.9 19.8 17.8 38.2 F&B revenue 6.6 22.3 23.2 37.3 50.7 8.1 18.4 26.3 41.4 45.4 Footfalls (2.8) 4.4 8.1 14.4 48.3 (3.0) (2.8) (1.1) 7.2 26.1 Source: Edelweiss research Table 5: PVR Q3FY19: Result preview Q4FY19E Q4FY18 YoY (%) Q3FY19 QoQ (%) Revenue 8,285 5,849 41.6 8,542 (3.0) EBITDA 1,607 944 70.3 1,754 (8.4) Reported Profit 486 262 85.4 521 (6.7) Other income 40 75 32 Tax 262 153 337 EBITDA margin (%) 19.4 16.1 20.5 Source: Edelweiss research; Note: Numbers for Q4FY19E are inclusive of SPI Cinemas We estimate overall revenue, EBITDA and PAT to grow ~42%, ~70% and ~85% YoY, respectively, in Q4FY19 (including revenue from SPI Cinemas).