QUARTERLY UPDATE - MEDIA Hits ‘n’ Misses: Unstoppable Baahubali rules India Equity Research | Media Baahubali 2: The Conclusion gave a big bang start to Q1FY18 with the blockbuster reporting overall domestic box office collection of INR10bn plus. However, the much hyped (expected to collect INR2bn plus) Salman Khan flick, Tubelight came croppers and ended with ~INR1bn box office collections. Movies like Sachin A Billion Dream and Hindi Medium performed moderately. Among Hollywood movies, The Fate Of The Furious 8 did well in Q1FY18. Base had movies like Housefull 3 (reported INR1bn plus collection) and The Jungle Book (reported INR1.8bn plus collection). We reiterate that huge scale and screen additions place PVR and Inox Leisure in a sweet spot to capture higher share of box office pie. \ Strong releases impelled ad growth Footfall at the multiplexes was mainly driven by Baahubali 2: The Conclusion. However, it fell short of expectations due to lacklustre performance by Tubelight ‐ base had movies like Housefull 3 and The Jungle Book. Among the Hollywood movies, The Fate Of The Furious 8 did moderately well in Q1FY18, while Guardians Of The Galaxy Vol.2, Pirates Of The Caribbean‐5 and Wonder Woman failed to make a mark. We estimate 18% YoY ad growth for PVR, aided by good expected performance of Tubelight, Baahubali 2 and Sachin A Billion Dream. PVR: Ticket prices to surge We estimate PVR’s ATP grew 10% YoY in Q1FY18. We expect the multiplex industry to continue to report decent growth in Q1FY18 on higher share of net box office collections led by: i) addition of screens in past 12 months (PVR opened 8 screens in Q1FY18); and ii) pick up in Hollywood films. Other key developments were: (a) 28% GST rate (above INR100 ATP) is neutral for industry. However, some benefits due to input credit set off will lead to EBITDA margin expansion; (b) PVR plans to open 5 IMAX screens; (c) ticket cap in Telangana was increased to INR200 and INR300 for regular and gold class, respectively, due to higher GST rate; (d) Local body tax of 30% above the GST rate of 28% led to a strike in Tamil Nadu; and (e) one MRP (no differential pricing) for products at airports, malls and cinemas. Outlook: Q2FY18 line up moderate along with strong base In 2FY18, stars spangled movies like Toilet: EK Prem Katha (Akshay Kumar), Jagga Abneesh Roy Jasoos (Ranbir Kapoor), Munna Michael (Tiger Shroff) and Jab Harry Met Sejal (Shah +91 22 6620 3141 Rukh Khan) are anticipated to do well. Further, a strong line up of English movies [email protected] (Spider‐Man: Homecoming, Dunkirk and War for the Planet of the Apes) may also aid Rajiv Berlia box office collection in Q2FY18. Pertinently, the base is strong with Q2FY17 seeing +91 22 6623 3377 [email protected] releases like Pink, Mohenjo Daro, Rustom, Dishoom and Sultan. July 05, 2017 Edelweiss Research is also available1 on www.edelresearch.com, Edelweiss Securities Limited Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. Media Table 1: Movies released in Q1FY17 Table 2: Movies released in Q1FY18 Total Total Movies (INR mn) Day 1Day 2Day 3 Collections Movies (INR mn) Day 1Day 2Day 3 Collections Udta Punjab 101 113 125 423 Sachin A Billion Dream 86 92 103 412 Te3n 26 40 46 178 Raabta 56 51 52 159 Housefull 3152 163 218 1,062 Half Girlfriend 103 106 111 492 Sarbjit 37 46 57 246 Tubelight 212 212 225 1,069 Baaghi 119 111 155 757 Hindi Medium 28 43 55 689 FAN 192 154 184 841 Begum Jaan 39 35 40 178 The Jungle Book 101 135 169 1,887 Baahubali 2 (Regional) 800 500 450 5,165 Ki and Ka 73 84 95 516 Baahubali 2 (Hindi) 410 405 465 5,105 Total 5,910 Total 13,269 Source: boxofficecollection, Edelweiss research Chart 1: Nielsen Consumer Confidence Index ‐ India 140 134 128 (Index) 122 116 110 Q3FY16 Q4CY10 Q1CY11 Q2CY11 Q3CY11 Q4CY11 Q1CY12 Q2CY12 Q3CY12 Q4CY12 Q1CY13 Q2CY13 Q3CY13 Q4CY13 Q1CY14 Q2CY14 Q3CY14 Q4CY14 Q1CY15 Q2CY15 Q3CY15 Q4CY15 Q1CY16 Q2CY16 Q4CY16 Source: Industry, Edelweiss research Fig. 1: Toilet: EK Prem Katha slated to release on August 11, 2017 Fig. 2: Spider‐Man to release on July 7, 2017 Source: Industry, Edelweiss research Edelweiss Securities Limited 2 Sector Update Table 3: Movies line up in Q2FY18 Release Date Movie Title Language Cast July 07‐Jul‐17 Spiderman : Homecoming English Robert Downey Jr., Tom Holland, Angourie Rice 07‐Jul‐17 Mom Hindi Sridevi, Nawazuddin Siddiqui, Akshaye Khanna 07‐Jul‐17 Guest In London Hindi Kartik Aaryan, Kriti Kharbanda, Paresh Rawal 14‐Jul‐17 Jagga Jasoos Hindi Ranbir Kapoor, Katrina Kaif, Govinda 14‐Jul‐17 War For The Planet Of The Apes English Judy Greer, Woody Harrelson, Andy Serkis 21‐Jul‐17 Munna Michael Hindi Tiger Shroff, Nidhi Agerwal, Nawazuddin Siddique 21‐Jul‐17 Dunkirk (Imax) English Tom Hardy, Cillian Murphy, Mark Rylance 21‐Jul‐17 The Black Prince English Jason Flemyng, Amanda Root 28‐Jul‐17 Mubarakan Hindi Anil Kapoor, Arjun Kapoor, Athiya Shetty 28‐Jul‐17 Valerian English Cara Delevingne, Ethan Hawke August 04‐Aug‐17 Jab Harry Met Sejal Hindi Shahrukh Khan, Anushka Sharma, Evelyn Sharma 04‐Aug‐17 Kidnap English Halle Berry, Robert Walker Branchaud, Dana Gourrier 11‐Aug‐17 Toilet : Ek Prem Katha Hindi Bhumi Pednekar, Akshay Kumar 11‐Aug‐17 The Emoji Movie 3D English Patrick Stewart, T.J. Miller, James Corden 11‐Aug‐17 Atomic Blonde English Sofia Bountella, Charlize Theron 11‐Aug‐17 Good Time English Jennifer Jason Leigh, Robert Pattinson, Barkhad Abdi 18‐Aug‐17 Bareilly Ki Barfi Hindi Ayushmann Khurrana, Kriti Sanon, Rajkummar Rao 18‐Aug‐17 Annabelle 2EnglishMiranda Otto, Stephanie Sigman 18‐Aug‐17 The Dark Tower English Katheryn Winnick, Matthew Mcconaughey 18‐Aug‐17 Logan Lucky English Katherine Waterston, Sebastian Stan, Channing Tatum 25‐Aug‐17 The Hitman’S Bodyguard English Ryan Reynolds, Samuel L. Jackson, Elodie Yung 25‐Aug‐17 An Inconvenient Truth 2EnglishAl Gore, Barack Obama, Donald J. Trump September 01‐Sep‐17 Baadshaho Hindi Ajay Devgn 01‐Sep‐17 Polaroid English Madelaine Petsch, Javier Botet, Kathryn Prescott 01‐Sep‐17 The Nut Job 2: Nutty By Nature English Will Arnett, Katherine Heigl 08‐Sep‐17 Kaalakaandi Hindi Saif Ali Khan, Sobhita Dhulipala 08‐Sep‐17 Poster Boys Hindi Sunny Deol, Bobby Deol, Shreyas Talpade 08‐Sep‐17 I.T. English Finn Wolfhard, Bill Skarsgard, Nicholas Hamilton 15‐Sep‐17 Simran Hindi Kangana Ranaut 15‐Sep‐17 Solutrean (3D) (Imax) English Kodi Smit‐ Mcp, Leonor Varela 15‐Sep‐17 Unlocked English Noomi Rapace, Orlando Bloom, John Malkovich 22‐Sep‐17 Lego Ninjago (3D) English Olivia Munn, Justin Theroux, Dave Franco 22‐Sep‐17 Bhoomi English Sanjay Dutt, Aditi Rao Hydari, Shekhar Suman 22‐Sep‐17 Victoria & Abdul English Olivia Williams, Michael Gambon, Judi Dench 29‐Sep‐17 American Made English Lola Kirke, Domhnall Gleeson, Tome Cruise 29‐Sep‐17 Flatliners English Nina Dobrev, Ellen Page, Diego Luna 29‐Sep‐17 Judwaa 2 Hindi Varun Dhawan Source: Industry, Edelweiss research 3 Edelweiss Securities Limited Media Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai – 400 098. Board: (91‐22) 4009 4400, Email: [email protected] Aditya Narain Head of Research [email protected] Coverage group(s) of stocks by primary analyst(s): Media DB Corp, DEN Networks, Dish TV India, Hathway Cable & Datacom, Jagran Prakashan, PVR, Sun TV Network, Zee Entertainment Enterprises Recent Research Date Company Title Price (INR) Recos 29‐Jun‐17 Media Multiplexes: Telangana provides relief; Sector Update 31‐May‐17 Hathway Healthy quarter; 40 Buy Cable & Result Update Datacom 30‐May‐17 PVR Strong content drives 1,448 Buy footfalls; Result Update Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Rating Interpretation Buy Hold Reduce Total Rating Expected to Rating Distribution* 161 67 11 240 Buy appreciate more than 15% over a 12‐month period * 1stocks under review Hold appreciate up to 15% over a 12‐month period > 50bn Between 10bn and 50 bn < 10bn Reduce depreciate more than 5% over a 12‐month period Market Cap (INR) 156 62 11 Edelweiss Securities Limited 4 Sector Update DISCLAIMER Edelweiss Securities Limited (“ESL” or “Research Entity”) is regulated by the Securities and Exchange Board of India (“SEBI”) and is licensed to carry on the business of broking, depository services and related activities. The business of ESL and its Associates (list available on www.edelweissfin.com) are organized around five broad business groups – Credit including Housing and SME Finance, Commodities, Financial Markets, Asset Management and Life Insurance. This Report has been prepared by Edelweiss Securities Limited in the capacity of a Research Analyst having SEBI Registration No.INH200000121 and distributed as per SEBI (Research Analysts) Regulations 2014. This report does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 includes Financial Instruments and Currency Derivatives. The information contained herein is from publicly available data or other sources believed to be reliable. This report is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this report should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in Securities referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment.