Media & Entertainment25feb20

India Equity Research | Media & Entertainment March 24, 2020

Sector Report Media & Entertainment

Refer to important disclosures at the end of this report Time to start buying; Covid-19 resets

estimates and valuations

. The market correction and Covid-19 led shutdowns have led to a notable correction in the Inox Leisure BUY stock prices of both PVR and Inox due to a lack of clarity on the extent of the shutdown. CMP Target Price However, we believe that current prices factor in a potential wash out in Q1FY21 as well. 256 357 . We have cut footfall assumption for Q4FY20 and Q1FY21 to bake in the impact of cinema shutdown until 15 May 2020 in our base case. In the worst-case scenario, we assume the PVR BUY entire Q1FY21 to be washed out and screen additions to also get impacted significantly. CMP Target Price . We expect normalcy from Q2FY21, with a rebound in footfalls and a gradual recovery in 1,207 1,582 ad revenues, assuming Covid-19 related issues get resolved by then. We have not assumed delayed content supply due to the postponement of shooting schedules. . We have cut FY21/22E EBITDA by 8%-28% for PVR and Inox, with a notable reduction in FY21 estimates. The target EV/EBITDA stand lower at 10x and 8x for PVR and Inox, respectively, to arrive at Rs1582 and Rs357 TPs with Buy rating. We are OW in EAP.

Covid-19 shut downs- factoring in limited visibility in Q1FY21 as well st Q4FY20 will see 18 days of wash out after government has ordered shutdowns until 31 March. In our revised estimates, we have factored in ~50% footfall decline in Q1FY21

(assuming first 45 days will be washed out), along with weakness in ad and other revenue streams. The expected revival after Q1 is also assumed to be slower as there could be a risk on future releases with delayed production activities due to the ongoing travel and other similar restrictions. However, this will be more applicable to Hollywood movies. Having said that, FY21

EBITDA (ex IND-AS) is cut by 27% and FY22 by 8%. Screen addition estimates are cut by 25- 29% for FY21, while for FY22 cut is 8% over the current estimates.

Valuations reset on revised earnings

The recent market crash and earnings reset stemming from the ongoing Covid-19 scare have resulted in a cut in the target multiples as well. We have worked out a detailed analysis in

Exhibit 2 and 4 on the new target valuation, with our revised multiples being near historical lows. Our worst-case numbers and trough multiples on FY22E EBITDA suggest some more downside in PVR and Inox. However, on our base case numbers and new target multiples (15% lower than earlier) for FY22 give us 31% and 39% upside on PVR and Inox, respectively, leading to an upgrade to Buy rating (from Hold) for PVR and maintaining Buy on Inox.

Outlook: structural story intact; rebound expected soon The multiplex industry, in the past, has not seen any impact on footfalls due to slow economic growth, as consumers have limited options outside of home entertainment. In our view, the bounce-back will be equally strong once Covid-19 issues get resolved. The revival in ad

revenues might take longer with overall economic growth. Increasing penetration of multiplexes in the country beyond metros is also aiding growth in footfalls as consumers are increasingly watching Hollywood and regional alongside Bollywood content. Social media awareness has also showcased the power of content, with ‘small-star’ movies performing exceptionally well while poor content of renowned stars relatively underperforming. PVR and This report is solely produced by Emkay Global. The following person(s) are responsible for the Inox are aggressively adding screens, while screen additions of Cinepolis and Carnival have production of the recommendation: moderated in the last two years. The stock price correction has factored in a weak Q4, while uncertainty relating to Covid-19 spread in Q1FY21 stays, and taking this into account, we Naval Seth recommend staggered buying in both the names. Key risks to our call: with no cinema [email protected] experience for, probably, two months, consumer habits of content consumption on OTT should +91 22 6624 2414 not lead to stickiness; sustained Covid-19 impact in the entire Q1FY21; delay in future releases due to the disruption in production activities; significant slowdown in screen openings; and Sonali Shah [email protected] weaker-than-expected content performance. +91 22 6624 2482

Please see our sector model portfolio (Emkay Alpha Portfolio): Media & Entertainment (Page 23)

Emkay Research is also available on www.emkayglobal.com and Bloomberg EMKAY. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

SA: SUNIL TIRUMALAI

Media & Entertainment India Equity Research | Sector Report

Scenario analysis

Exhibit 1: Scenario analysis for PVR Current Base case % change over current Worst case % change over current Assumptions FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E Operational parameters Footfalls (mn) 110 120 128 102 98 117 -7% -18% -8% 102 85 116 -7% -29% -9% ATP (Rs) 171 177 184 170 177 183 0% 0% -1% 169 177 182 -1% 0% -1% SPH (Rs) 94 101 108 93 98 105 -1% -3% -2% 92 100 105 -2% -1% -2% Screens additions 85 80 65 79 60 60 -7% -25% -8% 79 45 40 -7% -44% -38% Financial parameters (Rs mn) Ticketing revenue 18,894 21,317 23,578 17,424 17,356 21,407 -8% -19% -9% 17,586 15,046 21,212 -7% -29% -10% F&B revenue 10,403 12,180 13,805 9,556 9,657 12,338 -8% -21% -11% 9,588 8,497 12,268 -8% -30% -11% Ad revenue 4,148 4,798 5,593 3,876 3,808 4,512 -7% -21% -19% 3,874 3,400 4,193 -7% -29% -25% Others 3,705 4,112 4,312 3,471 3,370 4,310 -6% -18% 0% 3,736 2,920 4,330 1% -29% 0% Total revenue 37,150 42,407 47,288 34,327 34,191 42,567 -8% -19% -10% 34,784 29,864 42,002 -6% -30% -11% EBITDA (IND-AS 116 Adj.) 7,166 8,396 9,733 6,063 6,053 8,943 -15% -28% -8% 5,885 2,924 8,642 -18% -65% -11% Source: Company, Emkay Research

Exhibit 2: Scenario-wise target price for PVR Base-case (shutdown till 15th May 2020) Worst-case (entire Q1FY21 remain shutdown)

Valuations FY21E FY22E FY21E FY22E 10-year 10-year 10-year 10-year Trough Revised Trough Revised Trough Revised Trough Revised Average Average Average Average Multiple (x) 8.0 12.0 9.6 8.0 12.0 10.2 8.0 12.0 9.6 8.0 12.0 9.0 EV (Rs mn) 48,422 72,633 58,107 71,546 1,07,319 91,221 23,396 35,093 28,075 69,137 1,03,705 77,779 Net debt (Rs mn) 10,013 10,013 10,013 10,013 10,013 10,013 11,013 11,013 11,013 11,013 11,013 11,013 Market cap (Rs mn) 38,409 62,620 48,093 61,533 97,306 81,208 12,382 24,080 17,061 58,123 92,692 66,766 Number of shares (mn) 51 51 51 51 51 51 51 51 51 51 51 51 Target Price (Rs) 748 1,220 937 1,199 1,896 1,582 241 469 332 1,132 1,806 1,301 Source: Company, Emkay Research

Exhibit 3: Scenario analysis for Inox Current Base-case % change over current Worst-case % change over current Assumptions FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E FY20E FY21E FY22E Operational parameters Footfalls (mn) 71 77 82 66 63 75 -7% -17% -9% 66 55 75 -7% -28% -8% ATP (Rs) 199 207 216 191 207 214 -4% 0% -1% 191 208 218 -4% 0% 1% SPH (Rs) 80 87 94 76 85 92 -5% -2% -2% 76 84 93 -5% -3% -1% Screens additions 70 70 65 53 50 60 -24% -29% -8% 53 45 40 -24% -36% -38% Financial parameters (Rs mn) Ticketing revenue 11,851 13,270 14,804 11,041 10,925 13,327 -7% -18% -10% 11,112 9,531 13,749 -6% -28% -7% F&B revenue 5,370 6,230 7,250 4,953 5,045 6,436 -8% -19% -11% 4,953 4,352 6,584 -8% -30% -9% Ad revenue 1,924 2,212 2,544 1,800 1,710 1,967 -6% -23% -23% 1,800 1,466 1,801 -6% -34% -29% Other revenues 1,196 1,292 1,395 1,175 1,140 1,277 -2% -12% -8% 1,099 1,140 1,231 -8% -12% -12% Total revenue 20,341 23,004 25,993 18,968 18,820 23,007 -7% -18% -11% 18,963 16,490 23,365 -7% -28% -10% EBITDA (IND-AS 116 Adj.) 3,838 4,432 5,164 3,408 3,244 4,549 -11% -27% -12% 3,356 1,777 4,127 -13% -60% -20% Source: Company, Emkay Research

Exhibit 4: Scenario-wise target price for Inox Base-case (shutdown till 15th May 2020) Worst-case (entire Q1FY21 remain shutdown) Valuations FY21E FY22E FY21E FY22E Trough Average New Trough Average New Trough Average New Trough Average New Multiple (x) 7.7 10.5 8.4 7.7 10.5 8.2 8 11 8 8 11 8.1 EV (Rs mn) 24,979 34,063 27,250 35,030 47,768 37,123 13,681 18,655 14,924 31,776 43,330 33,426 Net debt (Rs mn) 514 514 514 514 514 514 913 913 913 913 913 913 Market cap (Rs mn) 24,465 33,548 26,736 34,516 47,254 36,608 12,768 17,742 14,011 30,862 42,417 32,513 Number of shares (mn) 103 103 103 103 103 103 103 103 103 103 103 103 Target Price (Rs) 238 327 261 336 461 357 124 173 137 301 413 317 Source: Company, Emkay Research

SA: SUNIL TIRUMALAI March 24, 2020 | 2 Media & Entertainment India Equity Research | Sector Report

Exhibit 5: Key assumptions FY21 FY22 Particulars Scenario 1 (base case) Scenario 2 (worst case) Scenario ~50% footfall decline in Q1FY21 as we assume shutdown till 15th May Footfall Cinemas to be shut for the entire Q1FY21 Higher growth in footfall and expect it to fully rebound from Q2FY21. No changes to current Ad growth 55% decline in Q1FY21 with a gradual recovery from Q2 Zero revenues in Q1FY21 growth rate assumptions Screen Screen additions cut by 36-44% for FY21 Cut by 25-29% in FY21 for both the companies and 8% in FY22 addition and 38% in FY22 Operating Lower other opex; cost rationalization on account of lower running cost with screen shut-down, rentals will come expenses off due to force closure clause with most of the mall owners. Valuation Target multiples cut close to trough valuations and 15% lower than earlier We have not assumed delays in content supply due to ongoing restriction on shootings. Major delays could Content be for Hollywood movies as the scare outside India is significantly higher. In our assumptions, we bake launches in a rebound in footfalls from Q2. Source: Emkay Research

Exhibit 6: Estimate changes for PVR FY20E FY21E FY22E Particulars Old New % Change Old New % Change Old New % Change Revenue (Rs mn) 37,150 34,327 -7.6 42,407 34,191 -19.4 47,288 42,567 -10.0 EBITDA (Rs mn) 12,102 10,999 -9.1 13,996 11,653 -16.7 15,733 14,943 -5.0 EBITDA Margin % 32.6 32.0 -53 bps 33.0 34.1 108 bps 33.3 35.1 183 bps PAT (Rs mn) 1,509 839 -44.4 2,488 971 -61.0 3,014 2,545 -15.6 EPS (Rs) 29.4 16.3 -44.4 48.5 18.9 -61.0 58.7 49.6 -15.6 Source: Emkay Research

Exhibit 7: Estimate changes for Inox FY20E FY21E FY22E Particulars Old New % Change Old New % Change Old New % Change Revenue (Rs mn) 20,341 18,968 -6.7 23,004 18,820 -18.2 25,993 23,007 -11.5 EBITDA (Rs mn) 6,431 6,001 -6.7 7,232 6,044 -16.4 8,164 7,549 -7.5 EBITDA Margin % 31.6 31.6 2 bps 31.4 32.1 68 bps 31.4 32.8 140 bps PAT (Rs mn) 1193 1,074 -10.0 1528 909 -40.5 2327 1,887 -18.9 EPS (Rs) 11.6 10.5 -10.0 14.9 8.9 -40.5 22.7 18.4 -18.9 Source: Emkay Research

Exhibit 8: Key revenue assumptions for PVR Particulars (Rsmn) FY17 FY18 FY19 FY20E FY21E FY22E Ticket revenue 11,249 12,471 17,640 17,424 17,356 21,407 % growth 13% 11% 41% -1% 0% 23% F&B revenue 5,781 6,243 9,475 9,556 9,657 12,338 % growth 16% 8% 52% 1% 1% 28% Ad revenue 2,518 2,969 3,773 3,876 3,808 4,512 % growth 17% 18% 27% 3% -2% 19% Others 2,081 1,826 60 3,471 3,370 4,310 Total revenue 21,628 23,509 30,947 34,327 34,191 42,567 % growth 15% 9% 32% 11% 0% 24% Source: Company, Emkay Research

Exhibit 9: Key revenue assumptions for Inox Particulars (Rsmn) FY17 FY18 FY19 FY20E FY21E FY22E Ticket revenue 7,481 8,022 9,752 11,041 10,925 13,327 % growth 2% 7% 22% 13% -1% 22% F&B revenue 2,841 3,061 4,356 4,953 5,045 6,436 % growth 7% 8% 42% 14% 2% 28% Ad revenue 962 1,390 1,765 1,800 1,710 1,967 % growth 6% 44% 27% 2% -5% 15% Others 923 1,009 1,049 1,175 1,140 1,277 Total revenue 12,207 13,482 16,922 18,968 18,820 23,007 % growth 5% 10% 26% 12% -1% 22% Source: Company, Emkay Research

SA: SUNIL TIRUMALAI March 24, 2020 | 3 Media & Entertainment India Equity Research | Sector Report

Story in Charts - Structural story remains intact

Exhibit 10: Gross domestic box office collection of major categories Exhibit 11: Language-wise share of GBOC - 2019

100 Hindi 2%3% 5% Hollywood 80 5% Tamil 60 Telugu

13% 44% Rs bn Rs 40 Malyalam

20 Kannada 13% Punjabi 0 2013 2014 2015 2016 2017 2018 2019 15% Marathi + Bengali + Gujarati Hindi Hollywood Tamil Telugu + Other regional

Source: Ormax media, Emkay Research Source: Ormax media, Emkay Research

Exhibit 12: ATP by language in India - 2019 Exhibit 13: Language-wise share of footfall in India - 2019

180 163 Hindi 142 3% 150 3% 7% Tamil 120 96 95 93 Telugu 90 78 77 75 74 72 8% 33%

Rs 69 Hollywood 60 9% Malyalam 30 0 Kannada

18% Punjabi Hindi

Tamil 19%

Others

Telugu

Punjabi Bengali Marathi

Gujarati Marathi + Bengali +

Kannada Malyalam

Hollywood Gujarati + Other regional

Source: Ormax media, Emkay Research Source: Ormax media, Emkay Research

Exhibit 14: Distinct shift toward multiplexes in India is clearly visible Exhibit 15: No. of movies crossing Rs1bn mark has been on the rise

12 16 14 14 14 10 12 11 9 8 10 8 7 7 7 6 6

In '000s In 4 4 2 2 0

FY14 FY15 FY17 FY18 FY19 2009 2011 2013 2015 2016 2017 2018 FY16

Single screen Multiplex YTDFY20

Source: FICCI media & entertainment report, 2019, Emkay Research Source: FICCI media & entertainment report, 2019, Emkay Research

Exhibit 16: PVR and Inox lead in terms of screen portfolio across major multiplexes in the country

1000 821 800 748 603 614 562 546 600 491 488 413 446 450 425 416 341 365 350 360 400 292 315 215 200

0 CY15 CY16 CY17 CY18 CY19

PVR Inox Carnival Cinepolis

Source: FICCI media & entertainment report, 2019, News articles, Emkay Research

SA: SUNIL TIRUMALAI March 24, 2020 | 4 Media & Entertainment India Equity Research | Sector Report

Emerging trends

Content over star power There has been a noticeable shift in the viewing patterns of the audience. A larger proportion of NBOC can be credited to movies with strong content. Such movies tend to accumulate most of their revenue post the 1st week of their run. Moreover, with content becoming the king, the prominence of opening weekend collections has been fading with every passing year, as can be clearly seen from the chart below. In addition, there has been a significant upsurge in the number of films crossing the Rs1bn threshold, despite having no high-profile celebrity as such.

Exhibit 17: No. of low-ticket movies that have crossed the Rs1bn Exhibit 18: Stronger content has led to lower dependence on mark in NBOC is on the rise opening weekend collections as a % of total collections

5 50%

4 32% 34% 34% 34% 4 40% 32% 28% 3 30% 25% 3 2 20% 2 10% 1 14% 13% 13% 13% 13% 12% 12% 1 0% 2013 2014 2015 2016 2017 2018 2019 0 FY17 FY18 FY19 YTD FY20 Day 1 Day 2-3

Source: Industry, Emkay Research Source: Ormax media, Emkay Research

Exhibit 19: No. of Bollywood films that have surpassed the Rs1bn Exhibit 20: No. of low-budget movies that have earned more than mark 50% of their revenue post 1st week of run

16 14 14 10 14 8 11 12 8 10 9 7 7 7 8 6 6 4 4 4 2 0

2 1

FY15 FY16 FY17 FY18 FY19 FY14 0

FY18 FY19 YTDFY20 YTDFY20

Source: FICCI media & entertainment report, 2019, Emkay Research Source: FICCI media & entertainment report, 2019, Emkay Research

Unlike the earlier scenario wherein people chose to watch films as soon as they released, there has been an increase in the tendency to wait for reviews and social media awareness. Since there is a growing penchant to watch films with “substance” over “masala”, a significant chunk of the collections show up in the 2nd or 3rd week after release. In addition, the contribution to the overall NBOC by high-profile celebrities has reduced over time. Except for YTDFY20, which had an exceptional run by big-budget movies, especially by Akshay Kumar (which accounted for 34% of the total box office collections by big-budget stars), there has been a significant reduction in contribution by such stars to the overall NBOC. This clearly shows how distinct is the shift in trends.

SA: SUNIL TIRUMALAI March 24, 2020 | 5 Media & Entertainment India Equity Research | Sector Report

Exhibit 21: Box office contribution of high-profile actors Exhibit 22: Box office takings by relatively newer actors is on the rise YTD YTD Particulars FY15 FY16 FY17 FY18 FY19 Particulars FY15 FY16 FY17 FY18 FY19 FY20 FY20 Shahrukh Khan Ayushmann Khurrana No. of Movies 1 1 3 1 1 - No. of Movies 2 0 0 4 2 4 NBOC (Rs mn) 2,033 1,480 2,910 625 910 - NBOC (Rs mn) 330 - - 1,175 2,082 3,701 Salman Khan Ranveer Singh No. of Movies 1 2 1 2 1 2 No. of Movies 1 2 1 1 2 0 NBOC (Rs mn) 2,330 5,277 3,005 4,590 1,690 3,590 NBOC (Rs mn) 312 2,604 600 2,862 3,795 - Akshay Kumar Ranbir Kapoor No. of Movies 3 4 3 3 3 3 No. of Movies 1 2 1 1 1 0 NBOC (Rs mn) 2,384 3,865 3,520 2,491 4,024 6,091 NBOC (Rs mn) 445 892 1,121 534 3,342 - Aamir Khan Vicky Kaushal No. of Movies 1 - 1 1 1 - No. of Movies 3 1 NBOC (Rs mn) 3,380 - 3,374 620 1,453 - NBOC (Rs mn) 3,905 285 Ajay Devgn Total movies 4 4 2 6 8 5 No. of Movies 2 1 1 3 1 2 Total NBOC (Rs mn) 1,087 3,496 1,721 4,571 13,124 3,986 NBOC (Rs mn) 1,963 762 1,001 3,812 1,508 3,735 % of total NBOC 4% 10% 6% 14% 34% 10% Hrithik Roshan Source: Industry, Emkay Research No. of Movies 1 - 2 - - 2 NBOC (Rs mn) 1,810 - 1,847 - - 4,639 Total movies 9 8 11 10 7 9

Total NBOC (Rs mn) 13,900 11,384 15,656 12,138 9,584 18,055

% of total NBOC 49% 33% 51% 36% 25% 46% Source: Industry, Emkay Research

Change in viewing trends: Hollywood and regional contribution rising Over the past few years, there has been growing acceptance of Hollywood movies in the country. In fact, there has been an uptick in the number of dubbed versions of Hollywood and other international movies as well. Hollywood movies amassed a total of Rs13.6bn in 2019, recording 40.6% growth over the preceding year. English movies (inclusive of dubbed versions) have logged a 24% CAGR over 2013-19, which undoubtedly shows the unprecedented growth and recognition Hollywood and other international films have received in the country.

Exhibit 23: Hollywood movie contribution uptrend at the expense of Exhibit 24: No. of Hollywood movies crossing the Rs500mn threshold Bollywood films has been on the rise

100% 10 8% 10% 10% 11% 15% 8 80% 32% 8 50% 50% 47% 60% 41% 6 5 40% 4 4 4 60% 3 20% 40% 40% 42% 44% 2 2 0% 2015 2016 2017 2018 2019 0 FY15 FY16 FY17 FY18 FY19 YTDFY20 Bollywood Regional Hollywood Source: FICCI, KPMG, EY, News articles, Emkay Research Source: Industry, Emkay Research With every passing year, Hollywood movies have been increasingly contributing to total box office collections in India. This is generally at the expense of Bollywood films, since their share has been on the decline. Despite the acceptance of English movies, most of this progress is attributable to major franchise movies. This is clearly demonstrated by big-budget flicks such as ‘Avengers: Endgame’ and ‘Spiderman: Far from home’ which accounted for an aggregate of 34% of the total Hollywood gross domestic box office collection in 2019. In addition, there has been a significant surge in footfalls reported for Hollywood shows. In 2019 alone, footfalls were up by 23%, which is considerably higher than its 5-year average of 15%. Average Ticket Prices (ATPs) for Hollywood movies is the highest across all categories of movies released in the country. In addition, in the face of large franchise releases, ticket prices generally witness a surge. Hence, the favorable treatment of big franchise movies works out well for the profitability of cinema owners.

SA: SUNIL TIRUMALAI March 24, 2020 | 6 Media & Entertainment India Equity Research | Sector Report

Exhibit 25: Net box office collection (NBOC) of Hollywood movies in Exhibit 26: Top-10 movies contribute heavily to total Hollywood India NBOC

16.0 100% 13.6 14.0 13% 80% 18% 12% 10% 12.0 20% 15% 23% 9.7 74% 76% 10.0 60% 67% 66% 78% 8.0 8.0 64% 60% 8.0

6.6 40% Rs bn Rs 6.0 4.5 3.8 4.0 20%

2.0 0% 0.0 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 Top 10 Top 20

Source: Ormax media, Emkay Research Source: KPMG in India’s media & entertainment report, 2019, Emkay Research

Exhibit 27: ATP trend of Hollywood movies (incl. of dubbed films) Exhibit 28: Footfalls for Hollywood movies are on the rise

170 163 120 98 160 153 100 80 150 145 77 75 141 142 80 65 140 135 60 Rs Rs 128 48

130 mn Rs 41 40 120 110 20 100 0 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019

Source: Ormax media, Emkay Research Source: Ormax media, Emkay Research

Exhibit 29: Gross domestic box office collection for regional movies

20 19

15 15 14 14 13 12 12 12 12 11 bn 10 10 9 10 9

5 2013 2014 2015 2016 2017 2018 2019 Tamil Telugu

Source: Ormax media, Emkay Research

Exhibit 30: ATP trend for regional languages Exhibit 31: Footfall trend for regional languages

100 300

80 250 60

200 Rs 40 mn 150 20

0 100 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 Tamil Telugu Tamil Telugu

Source: Ormax media, Emkay Research Source: Ormax media, Emkay Research

SA: SUNIL TIRUMALAI March 24, 2020 | 7 Media & Entertainment India Equity Research | Sector Report

Regional content, albeit being unpredictable, has shown moderate growth in the recent past. Tamil movies have shown 14% growth in GBOC in 2019, while Telugu movies delivered only 1% growth.

It is important to note that poor content has led to lower footfalls for Tamil and Telugu markets over the past few years, except for 2017 which was a one-off year on account of ‘Baahubali: The conclusion’. Good content in South has been lacking in the last 12-15 months, as is clearly evidenced from collections. However, we have witnessed a slight uptick in the same with the start of Pongal from this calendar year. In fact, in PVR’s Q3FY20 earnings call, management was very confident about Tamil, Telugu and Malayalam films having performed exceedingly well at the box office. Moreover, they were very bullish about the content line-up for the same for Q4FY20. In a noteworthy mention, the breadth of regional cinemas has now widened and also includes other upcoming markets such as Gujarati, Marathi and Punjabi which are gaining prominence and are increasingly contributing to overall box office collections, albeit in a small proportion. Over time, these markets could account for a bigger share of the box office collections and could potentially help to boost the total box office earnings.

Focus on premiumization With a view to enrich the viewing experience, multiplexes have been innovating and rapidly ramping up their premium format screen portfolio. Such screens command higher ATPs and help bolster F&B margins on account of higher SPH. With multiple premium offerings and a sustained focus on enhancing them, around 11% of PVR’s total portfolio comprises premium screens. Management has, time and again, emphasized the same to be 15% in the next few years. Inox has been focusing on adding more and more premium screens, with the launch of Insignia in FY18. Since then, the company has developed six different formats of premium screens. However, it still has a long way to go to catch up with PVR. Having said that, the intensity with which the company added screens over the past few years leads us to believe that it will be able to do the same for its luxury screen format as well. We believe that further value will be unlocked for Inox once it starts adding more premium screens.

In addition, exhibition players with higher number of superior screens find it relatively easier to attract sponsorship revenues. With a good brand profile and wider reach, PVR has been able to garner advertisement revenue with ease, especially compared with Inox. In a bleak macro- economic environment, with most corporates reporting weak ad growth, PVR was one of the few companies that had managed to record a 7% rise in Ad revenues in Q3FY20.

Exhibit 32: PVR’s premium format screen portfolio Format FY18 FY19 9MFY20 Gold Class/Luxe 36 35 41 4DX 7 14 17 Play House 4 8 12 IMAX 7 8 9 P (XL) 4 6 8 Onyx 1 1 Total 58 72 88 % of total screens 9% 10% 11% Source: Company, Emkay Research

Exhibit 33: Inox’s total premium screen portfolio Inox FY18 FY19 Q2FY20 Premium screens (Insignia) 28 46 52 % of total screens 6% 8% 9% Source: Company, Emkay Research

SA: SUNIL TIRUMALAI March 24, 2020 | 8 Media & Entertainment India Equity Research | Sector Report

Screen distribution The screen distribution for PVR has been skewed toward South India, primarily due to the acquisition of SPI cinemas in FY19. With around 286 screens in the South, PVR is particularly susceptible to the content performance of regional films. As mentioned earlier, regional content has been disappointing for a few quarters now. However, an uptick has been witnessed from the start of Q4FY20. Over the past few years, the company has been consistently increasing its screens in the West. In fact, it has added screens at a CAGR of 20% since FY12. On the other hand, Inox has 40% of its screens in Western India. With 252 screens in the West, the company is better positioned to profit from the box-office collection growth of Bollywood and English movies. ATPs for these categories are the highest in the country, which shall benefit the company. In addition, the number of regional movies being dubbed in Hindi is increasing as well. In fact, such films have managed to put on a good show at the box office as can be seen from ‘Baahubali’ (Rs5.1bn) and ‘2.0’ (Rs1.9bn). Due to this, the company is poised to benefit from the same. Moreover, INOL has been adding screens consistently in the North (24% of total screen) and South (22% of total), with major screens being added in the North.

Exhibit 34: PVR’s screen distribution Exhibit 35: Inox’s screen distribution

60% 50%

50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% FY13 FY14 FY15 FY16 FY17 FY18 FY19 YTD FY13 FY14 FY15 FY16 FY17 FY18 FY19 YTD FY20E FY20E East West North South East West North South

Source: Company, Emkay Research Source: Company, Emkay Research

SA: SUNIL TIRUMALAI March 24, 2020 | 9 Media & Entertainment India Equity Research | Sector Report

Global trends

Global trends are not comparable with India as the country is in a growth phase with continued multiplex screen additions along with share gains from single screens. Overall, India has not seen screen additions over the last couple of years as the decline in single-screens was compensated by strong growth in multiplexes. If we compare it with China, screen additions by multiplexes have grown at an average of 11% over the last five years. In developed markets, footfalls are driven by big-ticket movies while screen additions have halted. Developed countries have also experienced the impact of OTT players like Netflix and Amazon Prime due to their heavy content spends. The Indian market is dominated by Hindi and regional language content, and it will continue to be the case in the medium to long term, in our view. Limited regional and Hindi content on leading OTT platforms will continue to take consumers to cinemas for better experience and sustained content demand. Larger TV screen sizes in developed markets also differs from India which is still dominated by non-Smart TVs and 32-inch screen size. Both these factors restrict content consumption experience as well.

Exhibit 36: Top-10 box office markets globally Exhibit 37: North America Box office revenues

14.0 15 11.4 12.0 9.3 11.4 11.9 11.4 10.0 10.8 10.9 11.1 11.1 10.6 10.2 10.4 8.0 10 6.0 USD bn USD 4.0 2.4 1.6 1.6 1.6 1.6

1.2 $ bn 2.0 1.0 0.9

0.0 5

U.K.

USA

India

China

Japan

Russia

France Mexico

Germany 0

South Korea South CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19

Source: MPA theme report, 2019, HIS Markit, Emkay Research Source: MPA theme report, 2019, Emkay Research

Exhibit 38: China has shown tremendous growth despite having the Exhibit 39: Despite being in the Top-10 box office markets globally, same number of screens as India in 2009 India has one of the lowest screens per mn population

60 140 125 50 120

40 100 80 30 60

In '000s In 60 20 40 40 10 16 20 8 10 - 0 2009 2013 2016 2017 2018 India Brazil China South UK US India China USA Korea

Source: FICCI media & entertainment report, 2019, Emkay Research Source: FICCI media & entertainment report, 2019, Emkay Research

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Exhibit 40: Footfalls for major international markets In mn CY17 CY18 CY19 USA 1240 1300 1242 UK 171 177 176 Germany 122 104 120 Spain 100 98 106 Italy 99 92 105 Sweden 17 16 16 Ireland 16 16 15 Portugal 16 15 15 Norway 12 12 11 Baltics 9 11 10 Finland 9 8 8 Source: MPA theme report, 2019, AMC Entertainment annual report, 2019, Emkay Research

In the tables below, we have tried to analyze a few major multiplexes from around the globe and have tried compare them with Indian multiplexes. Some key highlights: . Revenue per screen: Over the past four years, multiplexes in North America, namely Cinemark, AMC Entertainment and Cineplex, have grown at an average of 2-4%. On the other hand, Cineworld (UK) and Major Cineplex (South Korea) have actually seen flat growth, if not a decline in its overall revenue-per screen metric. This is despite these countries being a part of the Top-10 global box office markets. On the other hand, India ranks in the bottom half of the Top-10 markets in the world. Despite this, it has reported growth numbers similar to the ones logged globally, which is an average of 6%/1% for PVR/Inox over the past three years. . Admission per screen: Rapid expansion, be it organic or inorganic, is the only way for multiplexes to make headway, especially in India where the screen density is extremely low, compared with other international markets. Due to this, admission per screen witnessed in India has been flat or negative over the past few years, which is in line with foreign exhibitors. This is clear from the 3%/-5% growth posted by PVR/Inox over the past three years. Inox has expanded rather aggressively compared with PVR over the same period. On an average, global multiplex chains have seen a 3% decline. . ATP: Canadian and UK exhibitors Cineplex and Cineworld have shown an average 3-11% growth (the highest ATP growth vs. other peers that we have analyzed). However, Cineworld had a one-off year in CY18 due to its entry in the North American market. On the flipside, domestic multiplexes have recorded significant growth in ATP, despite being in a price-sensitive market like India. In FY19, PVR logged 19% growth in ATP, while Inox’s growth was relatively flat, albeit being the highest yearly ATP it ever logged. . SPH: Around the globe, SPH has been on an upward trajectory over the past few years. This can clearly be attributed to the surge in offerings by all multiplexes. PVR/Inox posted 8%/9% growth on average - in line with their global peers. It is important to mention that SPH could expand with domestic multiplex players penetrating the Tier-1 and Tier-2 markets.

Despite having shown similar, if not superior growth, operationally and financially, compared with their global peers, which operate in saturated markets, PVR and Inox still receive similar valuation multiples. Domestic exhibitors have delivered significant growth in the recent past. The next leg of progress should come from the Tier-1 and Tier-2 markets, wherein these players are still trying to break through. If they are able to do so successfully, we believe that this will help in unlocking significant value for the businesses and could even lead to a re-rating.

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Media & Entertainment India Equity Research | Sector Report

Exhibit 41: Operating and financial performance for global peers Country USA Canada UK Thailand Company Cinemark Holdings (USD mn) AMC Entertainment (USD mn) Cineplex (CAD mn) Cineworld (USD mn) Major Cineplex (THB mn) Year CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19 Total Revenues 2,853 2,919 2,992 3,222 3,283 2,947 3,236 5,079 5,461 5,471 1,371 1,478 1,555 1,612 1,628 910 1,029 1,147 4,119 4,370 8,580 8,745 8,972 9,952 10,697 Box office 1,766 1,789 1,795 1,834 1,806 1,892 2,049 3,230 3,385 3,301 730 734 716 724 706 583 646 713 2,497 2,536 4,545 4,821 4,856 5,592 5,856 Concessions 937 990 1,039 1,109 1,161 910 1,019 1,548 1,672 1,720 418 421 442 476 447 210 246 284 1,145 1,240 1,375 1,443 1,665 1,972 2,097 Others 150 140 158 279 317 145 167 301 404 450 222 323 398 413 476 118 137 150 477 593 2,660 2,481 2,451 2,388 2,744 Theatres 513 526 533 546 554 387 906 1,014 1,006 1,004 162 165 163 164 165 218 226 232 790 804 171 Screens 5,796 5,903 5,959 6,048 6,132 5,426 10,558 11,169 11,091 11,041 1,655 1,683 1,676 1,686 1,693 2,011 2,115 2,217 9,518 9,678 628 678 710 782 815 Revenue per screen (In '000s) 492 494 502 533 535 543 306 455 492 496 828 878 928 956 962 453 487 517 433 452 13,662 12,898 12,637 12,726 13,125 Admissions (in mn) 280 287 277 282 280 197 215 347 359 356 77 75 70 69 66 94 100 104 273 275 29 30 31 35 34 Admission per screen (In '000s) 48 49 46 47 46 36 20 31 32 32 47 44 42 41 39 47 47 47 29 28 45 44 44 45 42 ATP (Rs) 6.3 6.2 6.5 6.5 6.5 9.6 9.5 9.3 9.4 9.3 9.5 9.8 10.2 10.5 10.6 6.2 6.5 6.9 9.3 9.2 165 166 162 162 173 Growth -1% 4% 0% -1% -1% -2% 1% -2% 4% 3% 3% 2% 4% 7% 35% -1% 1% -2% 0% 7% SPH (Rs) 3.4 3.5 3.8 3.9 4.2 4.6 4.7 4.5 4.7 4.8 5.4 5.7 6.0 6.4 6.7 2.3 2.5 2.7 4.3 4.5 48.2 48.6 53.5 55.6 61.4 Growth 3% 9% 5% 6% 3% -6% 4% 3% 4% 6% 6% 6% 9% 11% 57% 5% 1% 10% 4% 10% Source: Industry, Emkay Research

Exhibit 42: Operating and financial performance for PVR and Inox Company PVR (Rs mn) Inox (Rs mn) Year FY16 FY17 FY18 FY19 FY20E FY16 FY17 FY18 FY19 FY20E Total Revenues 18,811 21,628 23,509 30,947 34,327 11,606 12,207 13,482 16,922 18,968 Box office 9,948 11,249 12,471 17,640 17,424 7,311 7,481 8,022 9,752 11,041 Concessions 4,967 5,781 6,243 9,481 9,556 2,656 2,841 3,061 4,356 4,953 Others 3,896 4,598 4,796 3,826 7,347 1,638 1,885 2,399 2,814 2,975 Theatres 112 126 134 164 194 107 118 124 139 149 Screens 516 579 625 691 849 420 468 492 574 627 Revenue per screen (in '000s) 36,456 37,355 37,615 44,786 40,432 27,633 26,084 27,402 29,481 30,252 Exchange rate 66 65 65 69 74 66 65 65 69 74 Revenue per screen (in $ '000s) 550 576 577 648 546 419 402 420 426 409 Admissions (in mn) 70 75 76 100 102 53 54 53 63 66 Admission per screen (In '000s) 135 130 122 145 121 127 115 108 109 106 ATP (Rs) 188 196 210 214 170 170 178 193 197 191 Growth 5% 7% 2% -20% 5% 8% 2% -3% SPH (Rs) 72 81 89 91 93 58 62 66 74 76 Growth 12% 10% 2% 3% 7% 7% 12% 3% Source: Industry, Emkay Research

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Media & Entertainment India Equity Research | Sector Report

Exhibit 43: Valuation and return ratios for global peers Country USA Canada UK Thailand China South Korea Multiplex Cinemark Holdings AMC Entertainment Cineplex Cineworld Major cineplex Wanda cinema line CJ CGV

Year CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19 CY15 CY16 CY17 CY18 CY19E CY15 CY16 CY17 CY18 CY19E ROCE (%) 9.3 10.4 10.2 8.4 6.4 4.9 4.0 -4.6 6.1 1.3 13.9 8.0 7.1 7.9 4.8 10.8 9.7 - - 3.7 11.7 11.4 11.3 12.8 12.1 15.6 11.2 10.7 7.0 - 7.0 1.1 2.3 -8.8 ROE (%) 19.6 21.6 19.9 15.1 13.3 6.8 6.3 -23.6 6.3 -11.4 18.0 10.5 9.7 11.1 4.6 15.6 13.7 16.2 12.7 5.4 18.1 18.0 18.3 19.9 18.0 19.6 14.0 13.7 8.5 - 12.9 3.1 -0.4 -67.0 P/E (x) 17.0 16.0 14.1 15.4 16.1 20.0 22.5 - 13.6 - 28.0 41.6 35.2 18.0 47.1 18.3 18.3 38.5 14.9 22.2 26.9 24.6 21.8 14.4 19.3 112.1 46.5 40.3 29.7 27.8 51.3 120.8 - - - EV/EBITDA 8.7 9.4 8.9 8.9 7.2 8.8 16.5 10.2 7.8 7.3 11.9 15.7 12.4 8.4 10.2 11.4 10.5 10.3 10.2 8.0 14.2 13.9 11.6 8.1 9.8 80.0 31.4 26.9 17.8 14.3 17.8 14.3 11.6 8.6 - (X) Source: Industry, Emkay Research

Exhibit 44: Valuation and return ratios for Indian consumer facing companies Fashion retailers Shopper Stop Future Lifestyle ABFRL Trent Titan Page Industries Year FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 ROCE (%) 8.8 1.2 -4.5 20.8 7.2 4.9 4.0 5.8 9.1 10.8 -9.4 -5.5 8.7 8.0 15.1 9.4 5.0 6.1 5.5 5.7 26.3 20.8 14.8 17.6 18.7 43.5 43.3 41.7 43.9 46.4 ROE (%) 8.3 0.5 -7.5 35.3 7.1 1.3 1.8 5.1 8.7 11.3 -49.4 -17.6 5.7 11.5 25.5 10.7 3.8 5.6 5.5 6.0 29.1 20.5 18.4 24.2 25.2 58.0 50.5 44.5 45.9 48.6 P/E (x) 80.7 - 13.1 10.5 63.8 63.3 51.3 69.3 60.6 50.2 - - 223.0 99.2 53.1 37.8 95.4 151.5 131.7 123.9 42.6 44.6 57.7 73.9 72.2 78.1 58.4 61.2 72.9 70.7 EV/EBITDA (x) 15.2 19.7 20.4 22.4 17.0 6.3 6.9 17.0 19.8 19.1 31.6 33.5 31.6 28.5 33.7 29.2 54.1 68.6 57.0 53.1 30.2 32.2 36.2 51.5 47.2 48.4 36.2 39.5 46.4 45.2 Source: Industry, Emkay Research

SA: SUNIL TIRUMALAI March 24, 2020 | 13 Media & Entertainment India Equity Research | Sector Report

Valuations

Instances in the past: In the past, there has been various instances wherein PVRL and INOL have seen a knee-jerk reaction led by external events. A few recent examples are: 1) In July 2018, Maharashtra government proposed to permit outside food and beverages to be carried into cinema halls; and 2) Karnataka government put an upper limit cap of Rs200 on movie tickets in May 2017. On both these occasions, PVR and INOX saw a sharp sell-off as can be seen in the following chart below. However, favorable legal outcome of such cases led to a healthy bounce-back in stock prices and eventually got re-rated on the back of strong operating performance. PVRL IN and INOL IN recorded 30% and 12% returns from the lows during the F&B fiasco in 2018.

Exhibit 45: Knee-jerk reaction witnessed when Maharashtra government allowed bringing outside F&B in cinema halls

2,000 400

1,500 300

1,000 200

500 100 1/1/2018 4/1/2018 7/1/2018 10/1/2018

LHS: PVR RHS: Inox

Source: Company, Emkay Research

What is different now: The difference in the earlier events and Covid-19 is that former events started from one part of the country and were limited to one revenue stream (ticket sales or F&B) with both the events having political backing. Covid-19 impact (if spreads into Q1FY21 as well) on the other hand will lead to significant reduction in footfalls and its sustenance could lead to continued cinema shutdowns.

During difficult times, trough valuations of both PVR and Inox are ~7-8x one year for EV/EBITDA vs. 10-12x, which is their long-term valuation range. In order to make scenarios, we have cut our estimates for FY21 and FY22 and put through valuations on FY22E, and our finding is that the stocks provide limited downside. A recovery in the business with Covid-19 issues behind post Q1 and sustained content supply should translate into higher-than-current valuation multiples. At the current juncture, we assign 15% lower multiples from our earlier target multiples due to sharp market correction and some haziness on outlook for Q1 revival. However, on such valuation multiples also, we arrive at 31% and 39% upside in PVR and Inox, respectively, and assign Buy rating on both the names. Global peers have fallen considerably from their recent highs. Multiplexes from North America such as Cinemark is down 60%, while AMC and Cineplex have declined 59% and 68% respectively. UK based Cineworld has witnessed a staggering 78% decline, while Asian peers such as Major Cineplex and CJ CGV are down 52% and 59% respectively. PVR and Inox have also corrected 43% and 48%, respectively.

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Exhibit 46: Valuation charts Inox’s 5-year average of 1-year forward Exhibit 47: PVR’s 5-year average of 1-year forward EV/EBITDA EV/EBITDA

20.0 25.0

15.0 20.0

10.0 15.0

5.0 10.0

0.0 5.0

Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

Sep-17 Sep-15 Sep-15 Sep-16 Sep-18 Sep-19 Sep-16 Sep-17 Sep-18 Sep-19

1yr fwd Ev/Ebitda Mean STd+1 STd-1 1yr fwd Ev/Ebitda Mean STd+1 STd-1

Source: Emkay Research Source: Emkay Research

Exhibit 48: Inox’s 10-year average of 1-year forward EV/EBITDA Exhibit 49: PVR’s 10-year average of 1-year forward EV/EBITDA

25.0 25.0

20.0 20.0 15.0 15.0 10.0 5.0 10.0

0.0 5.0

Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20

Mar-10 Mar-15 Sep-15 Mar-11 Mar-12 Mar-13 Mar-14 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Sep-16 Sep-17 Sep-18 Sep-19

1yr fwd Ev/Ebitda Mean STd+1 STd-1 1yr fwd Ev/Ebitda Mean STd+1 STd-1

Source: Emkay Research Source: Emkay Research

Exhibit 50: Inox’s trough average of 1-year forward EV/EBITDA Exhibit 51: PVR’s trough average of 1-year forward EV/EBITDA

16.0 25.0 14.0 12.0 20.0 10.0 8.0 15.0 6.0 4.0 10.0 2.0

0.0 5.0

Jul-12 Jul-18

Apr-18 Oct-18 Oct-11 Apr-12

Jan-19 Jun-18 Jan-12 Jun-12

Mar-18

Feb-18 Feb-19 Feb-12 Mar-12

Aug-18 Sep-18 Nov-18 Dec-18 Aug-11 Sep-11 Nov-11 Dec-11

May-18 May-12

1yr fwd Ev/Ebitda Mean STd+1 STd-1 1yr fwd Ev/Ebitda Mean STd+1 STd-1

Source: Emkay Research Source: Emkay Research

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Content performance in QTD Q4FY20

Bollywood: Jan’20 and Feb’20 witnessed a 5%/23% yoy decline in net box office collections (NBOC), adversely affected by a high base from last year comparable period which had 4 movies crossing the Rs1bn threshold. As anticipated, films such as ‘Tanhaji’ and ‘Good Newwz’ put on a good show at the box office, accumulating Rs2.7bn and Rs1.1bn, respectively. These two movies alone accounted for 49% of the overall box office pool. . With a high base, QTD Q4FY20 NBOC stands at Rs8.8bn, down 24% yoy. With major movie releases getting pushed on account of Covid-19, it seems to be a wash-out quarter for NBOC and footfalls. Hollywood: QTD Q4FY20 collections stand at Rs1.3bn, up 26% yoy, boosted by ‘DoLittle’ which accounted for 64% of the total Hollywood collections, amassing Rs815mn. Regional: Limited data availability of regional movies restricts yoy comparison, but we try to highlight the performance of a few movies such as ‘Darbar’ which was released in multiple languages and managed to rake in Rs1.5bn, ‘Sarileru Neekevvaru’ (Telugu) and ‘Ala Vaikunthapurramuloo’ (Telugu) which collected Rs1.7bn and Rs2.0bn, respectively, in Q4FY20.

Content performance in Q4FY20 so far was weak, with only two films surpassing the Rs1bn mark. The only silver lining of the quarter was growth witnessed at the regional box office, which showed a rise after a few quarters of sustained disappointment. The impact of Covid-19 put a dampener on footfalls as many cinema halls are shut down.

Exhibit 52: Box office collections on a yoy basis, thus far Q4FY19 Q4FY20 Release Box office Collection Release Box office Collection Film Film date (Rs mn) date (Rs mn) Bollywood Movies Bollywood Movies Simmba 28-Dec-18 1,501 Dabangg 3 20-Dec-19 77 Uri: The Surgical Strike 11-Jan-19 2,428 Good Newwz 27-Dec-19 1,065 The Accidental Prime Minister 11-Jan-19 250 Tanhaji 10-Jan-20 2,716 Cheat India 18-Jan-19 78 Chhapaak 10-Jan-20 325 Thackeray 25-Jan-19 316 Jai Mummy Di 17-Jan-20 25 Manikarnika: The Queen of Jhansi 25-Jan-19 949 Street Dancer 3D 24-Jan-20 742 Panga 24-Jan-20 256 Jawaani Jaaneman 31-Jan-20 32

Total January 5,523 Total January 5,239 Ek Ladki Ko Dekha Toh Aisa Laga 01-Feb-19 200 Jawaani Jaaneman 31-Jan-20 250 Amavas 08-Feb-19 29 Malang 07-Feb-20 557 Gully Boy 14-Feb-19 1,394 Shikara 07-Feb-20 68 Total Dhamaal 22-Feb-19 1,508 Love Aaj Kal 14-Feb-20 365 Sonariya 01-Mar-19 66 Bhoot: Part One - The Haunted Ship 21-Feb-20 285 Shubh Mangal Zyaada Saavdhan 21-Feb-20 621 Thappad 28-Feb-20 320

Total February 3,196 Total February 2,464 Luka Chuppi 01-Mar-19 933 Baaghi 3 06-Mar-20 973 Badla 08-Mar-19 853 Angrezi Medium 13-Mar-20 105 Kesari 22-Mar-19 1,070 Babloo Bachelor 20-Mar-20

Total March 2,855 Total March 1,078 Total Q4FY19 11,574 Total Q4FY20 8,782 Source: Industry, Emkay Research

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Exhibit 53: Box office collection on a yoy basis, thus far Q4FY19 Q4FY20 Release Box office Collection Release Box office Collection Hollywood Movies Hollywood Movies date (Rs mn) date (Rs mn) Bumblebee 04-Jan-19 70 The Grudge 03-Jan-20 175 Alita: Battle Angels 08-Feb-19 96 Bombshell 03-Jan-20 10 How to Train Your Dragon: The 01-Mar-19 - DoLittle 17-Jan-20 815 Hidden World Captain Marvel 08-Mar-19 842 1917 17-Jan-20 100 Bad boys for life 31-Jan-20 71 Jojo Rabbit 31-Jan-20 34 Birds of Prey 07-Feb-20 53 Little Women 07-Feb-20 10 Onward 06-Mar-20 Godzilla vs Kong 11-Mar-20 The invisble man 13-Mar-20 Mulan 27-Mar-20 Total 1,008 Total 1,267

Release Box office Collection Release Box office Collection Regional Movies Regional Movies date (Rs mn) date (Rs mn) Petta 10-Jan-19 2,170 Darbar (multi-language) 09-Jan-20 1,459 Viswasam 10-Jan-19 1,700 Anjaam Pathiraa (Malyalam) 10-Jan-20 179 F2 - Fun and Frustration 12-Jan-19 1,210 Sarileru Neekevvaru (Telugu) 11-Jan-20 1,696 Yatra 08-Feb-19 155 Ala Vaikunthapurramuloo (Telugu) 12-Jan-20 2,003 Pattas (Tamil) 15-Jan-20 319 Psycho (Tamil) 24-Jan-20 106 Bheeshma 21-Feb-20 356 Total 5,235 Total 6,118 Source: Industry, Emkay Research

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PVR’s Key Financials (Consolidated) Income Statement Y/E Mar (Rs mn) FY18 FY19 FY20E FY21E FY22E Revenue 23,509 30,947 34,327 34,191 42,567 Expenditure 19,327 24,992 23,327 22,538 27,624 EBITDA 4,182 5,955 10,999 11,653 14,943 Depreciation 1,537 1,913 5,350 6,035 6,541 EBIT 2,646 4,042 5,649 5,618 8,402 Other Income 145 240 301 360 140 Interest expenses 837 1,280 4,628 4,510 4,695 PBT 1,954 3,002 1,323 1,468 3,848 Tax 704 1,097 486 499 1,308 Extraordinary Items 0 0 0 0 0 Minority Int./Income from Assoc. 0 (16) 2 2 5 Reported Net Income 1,249 1,889 839 971 2,545 Adjusted PAT 1,249 1,889 839 971 2,545

Balance Sheet Y/E Mar (Rs mn) FY18 FY19 FY20E FY21E FY22E Equity share capital 467 467 513 513 513 Reserves & surplus 10,282 11,977 14,900 15,742 18,158 Net worth 10,750 12,444 15,413 16,255 18,671 Minority Interest 8 2,566 0 0 0 Loan Funds 8,305 12,824 8,824 10,124 9,124 Net deferred tax liability (150) 848 (2,284) (2,284) (2,284) Total Liabilities 18,913 28,682 21,952 24,095 25,511 Net block 15,899 28,008 57,395 60,715 64,744 Investment 209 111 111 111 111 Current Assets 6,204 8,705 9,627 9,667 11,304 Cash & bank balance 320 390 382 139 260 Other Current Assets 427 429 990 952 1,143 Current liabilities & Provision 4,416 10,349 46,888 47,706 51,955 Net current assets 1,789 (1,644) (37,261) (38,038) (40,651) Misc. exp 0 0 0 0 0 Total Assets 18,913 28,682 21,952 24,095 25,511

Cash Flow Y/E Mar (Rs mn) FY18 FY19 FY20E FY21E FY22E PBT (Ex-Other income) (NI+Dep) 1,808 2,762 1,021 1,108 3,708 Other Non-Cash items 0 0 0 0 0 Chg in working cap 171 4,501 32,476 535 2,733 Operating Cashflow 2,554 10,861 (29,510) 1,063 4,844 Capital expenditure (2,310) (15,213) (34,237) (8,954) (10,570) Free Cash Flow 245 (4,352) (63,747) (7,891) (5,726) Investments (190) 99 0 0 0 Other Investing Cash Flow 0 0 0 0 0 Investing Cashflow (2,354) (14,875) (33,936) (8,594) (10,430) Equity Capital Raised 0 0 46 0 0 Loans Taken / (Repaid) 109 4,519 (4,000) 1,300 (1,000) Dividend paid (incl tax) (113) (113) (128) (128) (128) Other Financing Cash Flow 661 958 72,147 10,628 11,530 Financing Cashflow (180) 4,084 63,437 7,289 5,707 Net chg in cash 21 70 (9) (242) 121 Opening cash position 299 320 390 382 139 Closing cash position 320 390 382 139 260 Source: Company, Emkay Research

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Key Ratios for PVR Profitability (%) FY18 FY19 FY20E FY21E FY22E EBITDA Margin 17.8 19.2 32.0 34.1 35.1 EBIT Margin 11.3 13.1 16.5 16.4 19.7 Effective Tax Rate 36.1 36.5 36.7 34.0 34.0 Net Margin 5.3 6.2 2.4 2.8 6.0 ROCE 15.2 18.0 23.5 26.0 34.4 ROE 12.2 16.3 6.0 6.1 14.6 RoIC 15.6 18.7 24.7 26.6 36.2

Per Share Data (Rs) FY18 FY19 FY20E FY21E FY22E EPS 24.3 36.8 16.3 18.9 49.6 CEPS 54.3 74.1 120.6 136.5 177.0 BVPS 209.4 242.5 300.3 316.7 363.8 DPS 2.2 2.2 2.5 2.5 2.5

Valuations (x) FY18 FY19 FY20E FY21E FY22E PER 54.0 35.7 80.4 69.5 26.5 P/CEPS 32.1 23.5 14.4 12.7 9.8 P/BV 6.3 5.4 4.4 4.1 3.6 EV / Sales 3.2 2.6 2.2 2.3 1.8 EV / EBITDA 18.0 13.4 6.9 6.6 5.1 Dividend Yield (%) 0.2 0.2 0.2 0.2 0.2

Gearing Ratio (x) FY18 FY19 FY20E FY21E FY22E Net Debt/ Equity 0.7 1.0 0.5 0.6 0.5 Net Debt/EBIDTA 1.9 2.1 0.8 0.9 0.6 Working Cap Cycle (days) 22.8 (24.0) (400.3) (407.6) (350.8)

Growth (%) FY18 FY19 FY20E FY21E FY22E Revenue 8.7 31.6 10.9 (0.4) 24.5 EBITDA 17.1 42.4 84.7 5.9 28.2 EBIT 21.0 52.8 39.7 (0.6) 49.6 PAT 25.1 51.3 (55.6) 15.7 162.2

Quarterly (Rs mn) Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Revenue 8,431 8,376 8,804 9,732 9,157 EBITDA 1,643 1,608 2,786 3,181 3,073 EBITDA Margin (%) 19.5 19.2 31.6 32.7 33.6 PAT 553 467 175 479 363 EPS (Rs) 11.8 10.0 3.7 10.2 7.8 Source: Company, Emkay Research

Shareholding Pattern (%) Jun-19 Sep-19 Sep-19 Oct-19 Dec-19 Promoters 20.2 19.6 19.6 18.4 18.4 FIIs 44.9 42.5 42.9 42.1 42.9 DIIs 9.6 11.2 10.6 28.2 30.1 Public and Others 25.2 26.8 27.0 11.3 8.6 Source: Capitaline

SA: SUNIL TIRUMALAI March 24, 2020 | 19 Media & Entertainment India Equity Research | Sector Report

Inox’s Key Financials (Consolidated) Income Statement Y/E Mar (Rs mn) FY18 FY19 FY20E FY21E FY22E Revenue 13,482 16,922 18,968 18,820 23,007 Expenditure 11,378 13,830 12,967 12,776 15,458 EBITDA 2,104 3,092 6,001 6,044 7,549 Depreciation 867 955 2,475 2,690 2,943 EBIT 1,237 2,137 3,526 3,354 4,607 Other Income 145 149 150 160 200 Interest expenses 289 237 2,030 2,081 2,284 PBT 1,093 2,049 1,646 1,433 2,523 Tax 367 656 572 523 636 Extraordinary Items (417) 0 0 0 0 Minority Int./Income from Assoc. 2 0 0 0 0 Reported Net Income 310 1,393 1,074 909 1,887 Adjusted PAT 728 1,393 1,074 909 1,887

Balance Sheet Y/E Mar (Rs mn) FY18 FY19 FY20E FY21E FY22E Equity share capital 962 1,026 1,026 1,026 1,026 Reserves & surplus 5,735 8,612 5,942 10,329 12,092 Net worth 6,697 9,638 6,968 11,355 13,118 Minority Interest 0 0 0 0 0 Loan Funds 2,920 1,100 1,100 1,100 1,100 Net deferred tax liability (811) (529) (2,279) (2,279) (2,279) Total Liabilities 8,806 10,210 5,790 10,176 11,940 Net block 7,718 9,224 28,459 32,132 34,628 Investment 136 11 11 11 11 Current Assets 3,647 4,387 5,017 5,660 6,031 Cash & bank balance 155 136 357 574 357 Other Current Assets 0 0 0 0 0 Current liabilities & Provision 3,235 4,050 28,337 28,267 29,370 Net current assets 413 337 (23,320) (22,606) (23,339) Misc. exp 0 0 0 0 0 Total Assets 8,806 10,210 5,790 10,176 11,940

Cash Flow Y/E Mar (Rs mn) FY18 FY19 FY20E FY21E FY22E PBT (Ex-Other income) (NI+Dep) 948 1,900 1,496 1,273 2,323 Other Non-Cash items 0 0 0 0 0 Chg in working cap (299) 339 22,128 (496) 515 Operating Cashflow 1,714 2,629 1,396 3,104 5,344 Capital expenditure (1,471) (2,559) (21,712) (6,363) (5,439) Free Cash Flow 243 70 (20,316) (3,259) (95) Investments (17) 125 0 0 0 Other Investing Cash Flow 0 0 0 0 0 Investing Cashflow (1,343) (2,285) (21,562) (6,203) (5,239) Equity Capital Raised 0 64 0 0 0 Loans Taken / (Repaid) (251) (1,820) 0 0 0 Dividend paid (incl tax) 0 0 0 0 0 Other Financing Cash Flow 169 1,629 22,417 5,398 1,961 Financing Cashflow (371) (363) 20,387 3,317 (323) Net chg in cash 1 (20) 221 218 (218) Opening cash position 155 155 136 357 574 Closing cash position 155 136 357 574 357 Source: Company, Emkay Research

SA: SUNIL TIRUMALAI March 24, 2020 | 20 Media & Entertainment India Equity Research | Sector Report

Key Ratios for Inox Profitability (%) FY18 FY19 FY20E FY21E FY22E EBITDA Margin 15.6 18.3 31.6 32.1 32.8 EBIT Margin 9.2 12.6 18.6 17.8 20.0 Effective Tax Rate 33.6 32.0 34.8 36.5 25.2 Net Margin 5.4 8.2 5.7 4.8 8.2 ROCE 16.2 24.0 46.0 44.0 43.5 ROE 11.9 17.1 12.9 9.9 15.4 RoIC 16.2 24.6 49.6 48.8 46.3

Per Share Data (Rs) FY18 FY19 FY20E FY21E FY22E EPS 7.6 13.6 10.5 8.9 18.4 CEPS 16.6 22.9 34.6 35.1 47.1 BVPS 69.6 93.9 67.9 110.7 127.9 DPS 0.0 0.0 0.0 0.0 0.0

Valuations (x) FY18 FY19 FY20E FY21E FY22E PER 37.4 20.8 27.0 31.9 15.4 P/CEPS 25.6 18.5 12.3 12.1 9.0 P/BV 4.1 3.0 4.2 2.6 2.2 EV / Sales 2.2 1.8 1.6 1.6 1.3 EV / EBITDA 14.2 9.7 5.0 4.9 3.9 Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0

Gearing Ratio (x) FY18 FY19 FY20E FY21E FY22E Net Debt/ Equity 0.4 0.1 0.1 0.0 0.1 Net Debt/EBIDTA 1.3 0.3 0.1 0.1 0.1 Working Cap Cycle (days) 7.0 4.3 (455.6) (449.6) (375.9)

Growth (%) FY18 FY19 FY20E FY21E FY22E Revenue 10.4 25.5 12.1 (0.8) 22.2 EBITDA 44.1 46.9 94.1 0.7 24.9 EBIT 99.5 72.7 65.0 (4.9) 37.4 PAT (2.5) 348.8 (22.9) (15.3) 107.5

Quarterly (Rs mn) Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Revenue 4,331 4,788 4,930 5,199 5,129 EBITDA 835 973 1,501 1,678 1,690 EBITDA Margin (%) 19.3 20.3 30.4 32.3 32.9 PAT 365 581 270 351 350 EPS (Rs) 3.8 6.0 2.8 3.7 3.6 Source: Company, Emkay Research

Shareholding Pattern (%) Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Promoters 51.9 51.9 51.9 51.9 51.9 FIIs 12.1 11.3 12.2 12.2 11.0 DIIs 21.0 21.5 19.7 21.2 22.4 Public and Others 15.1 15.4 16.2 14.8 14.8 Source: Capitaline

SA: SUNIL TIRUMALAI March 24, 2020 | 21 Media & Entertainment India Equity Research | Sector Report

Inox Leisure RECOMMENDATION HISTORY TABLE RECOMMENDATION HISTORY CHART Closing Period Date TP Rating Analyst BUY Hold Sell Price (months) Accumulate Reduce Price Target Price 07-Feb-20 424 467 12m Buy Naval Seth 475

25-Nov-19 362 430 12m Buy Naval Seth 418 23-Oct-19 354 430 12m Buy Naval Seth 361 26-Sep-19 337 410 12m Buy Naval Seth 304 23-Sep-19 334 410 12m Buy Naval Seth 23-Aug-19 256 363 12m Buy Naval Seth 247 02-Aug-19 291 397 12m Buy Naval Seth 190 20-Jun-19 325 397 12m Buy Naval Seth

13-May-19 309 397 12m Buy Naval Seth

27-Feb-17 24-Feb-18 21-Feb-19 18-Feb-20

24-Aug-18 21-Aug-19 27-Aug-17 04-Apr-19 300 370 12m Buy Naval Seth Source: Bloomberg, Company, Emkay Research 25-Mar-19 294 370 12m Buy Naval Seth 11-Mar-19 307 322 12m Buy Naval Seth 08-Feb-19 260 322 12m Buy Naval Seth 23-Oct-18 208 279 12m Buy Naval Seth 03-Aug-18 224 279 12m Buy Naval Seth 24-Jul-18 198 244 12m Hold Naval Seth 07-May-18 282 320 12m Buy Naval Seth 29-Jan-18 274 313 12m Buy Naval Seth 11-Jan-18 289 255 12m Buy Naval Seth 01-Nov-17 263 304 12m Buy Naval Seth 16-Aug-17 244 276 12m Hold Naval Seth 26-Jul-17 261 296 12m Hold Naval Seth 22-May-17 279 326 12m Hold Naval Seth 02-May-17 292 300 12m Hold Naval Seth

Source: Company, Emkay Research

PVR RECOMMENDATION HISTORY TABLE RECOMMENDATION HISTORY CHART Closing Period Date TP Rating Analyst BUY Hold Sell Price (months) Accumulate Reduce Price Target Price 24-Jan-20 1,959 2,101 12m Hold Naval Seth 2125

25-Nov-19 1,790 1,860 12m Hold Naval Seth 1920 17-Oct-19 1,841 1,850 12m Hold Naval Seth 1715 26-Sep-19 1,884 1,850 12m Hold Naval Seth 1510 23-Sep-19 1,831 1,850 12m Hold Naval Seth 1305 26-Jul-19 1,708 1,700 12m Hold Naval Seth 20-Jun-19 1,641 1,700 12m Hold Naval Seth 1100 13-May-19 1,724 1,700 12m Hold Naval Seth

04-Apr-19 1,658 1,637 12m Hold Naval Seth

27-Feb-17 24-Feb-18 21-Feb-19 18-Feb-20

24-Aug-18 21-Aug-19 27-Aug-17 25-Mar-19 1,584 1,643 12m Hold Naval Seth Source: Bloomberg, Company, Emkay Research 11-Mar-19 1,543 1,637 12m Hold Naval Seth 28-Oct-18 1,295 1,637 12m Hold Naval Seth 26-Oct-18 1,295 1,417 12m Hold Naval Seth 13-Aug-18 1,284 1,449 12m Accumulate Naval Seth 03-Aug-18 1,177 1,348 12m Accumulate Naval Seth 26-Jul-18 1,119 1,114 12m Hold Naval Seth 04-May-18 1,425 1,356 12m Hold Naval Seth 31-Jan-18 1,461 1,340 12m Hold Naval Seth 27-Oct-17 1,421 1,294 12m Hold Naval Seth 16-Aug-17 1,329 1,247 12m Hold Naval Seth 26-Jul-17 1,354 1,443 12m Hold Naval Seth 30-May-17 1,448 1,598 12m Hold Naval Seth 22-May-17 1,481 1,598 12m Hold Naval Seth

Source: Company, Emkay Research

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Emkay Alpha Portfolio – Media & Entertainment

EAP sector portfolio BSE200 EAP OW/UW OW/UW EAP Weight Company Name Weight Weight (%) (bps) (Normalised) Media & Entertainment 0.26 0.26 0% 0 100.00 DB Corp* 0.00 0.00 NA 0 0.00 Dish TV* 0.00 0.00 NA 0 0.00 Entertainment Network* 0.00 0.00 NA 0 0.00 Inox Leisure 0.00 0.02 NA 2 7.81 Jagran Prakashan* 0.00 0.00 NA 0 0.00 PVR 0.00 0.02 NA 2 7.70 Sun TV Network 0.06 0.04 -28% -2 17.09 Zee Entertainment 0.20 0.17 -12% -2 67.40 Cash 0.00 0.00 NA 0 0.00 Source: Emkay Research

* Not under coverage: Equal Weight

Analyst: Naval Seth  High Conviction/Strong Over Weight  High Conviction/Strong Under Weight Contact Details Sector portfolio NAV [email protected] +91 22 6624 2414 Base Latest Sector 1-Apr-19 19-Dec-19 18-Feb-20 19-Mar-20 Consumer Durables, Media & EAP - Media & Entertainment 100.0 74.0 68.1 40.7 Entertainment, SMID and Telecom BSE200 Neutral Weighted Portfolio (ETF) 100.0 64.3 58.6 35.1 Analyst bio *Performance measurement base date 1st April 2019 Naval holds an MBA in Finance and has Source: Emkay Research more than 11 years of experience in equity research. His team currently NAV chart covers 18 stocks spread across three different sectors. NAV 105 90

75 60 45

30 Apr-19 May-19 Jun-19 Aug-19 Sep-19 Nov-19 Dec-19 Feb-20 Mar-20

EAP - Media & Entertainment BSE200 Neutral Weighted Portfolio (ETF)

Source: Emkay Research

Please see our model portfolio (Emkay Alpha Portfolio): SMID

Please see our model portfolio (Emkay Alpha Portfolio): Nifty

SA: SUNIL TIRUMALAI March 24, 2020 | 23 Media & Entertainment India Equity Research | Sector Report

Emkay Rating Distribution

Ratings Expected Return within the next 12-18 months. BUY Over 15% HOLD Between -5% to 15% SELL Below -5%

Completed Date: 24 Mar 2020 20:20:40 (SGT) Dissemination Date: 24 Mar 2020 20:21:40 (SGT)

Sources for all charts and tables are Emkay Research unless otherwise specified.

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SA: SUNIL TIRUMALAI March 24, 2020 | 24 Media & Entertainment India Equity Research | Sector Report

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SA: SUNIL TIRUMALAI March 24, 2020 | 25 Media & Entertainment India Equity Research | Sector Report

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SA: SUNIL TIRUMALAI March 24, 2020 | 26 Media & Entertainment India Equity Research | Sector Report

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SA: SUNIL TIRUMALAI March 24, 2020 | 27 Media & Entertainment India Equity Research | Sector Report

SINGAPORE DBS Bank Ltd Contact: Janice Chua 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore 018982 Tel. 65-6878 8888 Fax: 65 65353 418 e-mail: [email protected] Company Regn. No. 196800306E

THAILAND DBS Vickers Securities (Thailand) Co Ltd Contact: Chanpen Sirithanarattanakul 989 Siam Piwat Tower Building, 9th, 14th-15th Floor Rama 1 Road, Pathumwan, Nagkok Thailand 10330 Tel. 66 2 857 7831 Fax: 66 2 658 1269 e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: Maynard Priajaya Arif DBS Bank Tower Ciputra World 1, 32/F JI. Prof. Dr. Satrio Kav. 3-5 Jakarta 12940, Indonesia Tel. 62 21 3003 4900 Fax: 62 21 3003 4943 e-mail: [email protected]

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