Weekender November 04th, 2011

Transcription

1 Weekender November 04th, 2011 Index Closing Chg Chg(%) Sensex % Nifty % Auto % Bankex % Cap Goods % Cons Durables % FMCG % Healthcare % IT % Metal % Oil & Gas % Power % Realty % World Index Closing Chg(`) Chg(%) Dow Jones % Nasdaq % Hang Seng % Nikkei % FTSE % Brazil Bovespa % Russia RTS % Mexico Bolspa % Singapore Strait % As on Friday 4pm Top Gainers Closing Chg(`) Chg(%) Allahabad Bank % Havells India % Sun TV Network Ltd % Bank of Baroda % Hindustan Unilever L % As on 04th Nov,11 Top Losers Closing Chg(`) Chg(%) Jaypee Infratech Ltd % Jain Irrigation % Tata Motors Ltd % Sterlite Indus % Jaiprakash Power Ven % As on 04th Nov,11 Metal Closing Chg(`) Chg(%) Gold($/oz) % Silver($/oz) % Aluminium($/MT) % Copper($/MT) % Lead($/MT) % Zinc($/MT) % As on Friday 4pm Date DII(cash) FII(Cash) FII(FO) 31-Oct Nov ,69 2-Nov Nov-11 NA Nov-11 NA ADR's Closing Chg($) Chg(%) Infosys % ICICI Bank % HDFC BANK % Tata Motors % Wipro % As on Thursday SNAP SHOT During the week ended 04 th November 2011, the key benchmark indices ended the week with flat note with high volatility due to global concerns. However, the benchmark indices closed with positive note on the last trading session with volatile trade as euro-zone debt worries eased after Greece on Thursday, 3 November 2011, shelved plans for a financial-bailout referendum and after a surprise interest-rate cut from the European Central Bank (ECB) on that day. The food price index rose 12.21%, it s highest in 9 months, and the fuel price index climbed 14.50% in the year to October 22. In the previous week, annual food and fuel inflation stood at 11.43% and 14.70% respectively. In the near term we expect stock-specific activity to dominate trade with the earnings season as its peak. Investors will closely watch the management commentary at the time of announcement of 2Q12 results, which will provide cues on futures earnings outlook. The week ahead is a truncated one as the stock market remains closed on 7 th November 2011 on account of Bakri-Id and again on 10 th November 2011 on account of Gurunanak Jayanti. Global markets will on 7 November 2011, react to the influential US non-farms payroll data as it is due today late hours (4 November 2011), is expected to show non-farm payrolls rose by just 90,000 in October, after a rise of 103,000 in September. The unemployment rate is expected to remain at 9.1% Nifty Oct 31-Oct 1-Nov 2-Nov 3-Nov 4-Nov Global Economic Update United States: US Mortgage Bankers Association s Index increased by 0.2% For the week ended October 28, 2011 compared to prior week rise of 15%. The group refinancing gauge was down by 0.2% and purchases Index advanced by 1.8% for the same period. US ISM Non-Manufacturing composite Index fell to 52.9 in the month of October from 53 recorded in the month of September.

2 GDR's Closing Chg($) Chg(%) RIL % SBI % L&T % Banking Data 10/7/2011(`Crs) Chg(`Crs) Chg(%) Credit growth % Deposit growth % ECONOMIC CALENDAR Date Economic Data Previous UNITED STATES 9-Nov MBA Mortgage Applications 0.20% 9-Nov Wholesale Inventories 0.40% 10-Nov Trade Balance -$45.6B 10-Nov Initial Jobless Claims 397K 10-Nov Continuing Claims 3683K UNITED KINGDOM 8-Nov Manufacturing Production (YoY) 1.50% 10-Nov BOE ANNOUNCES RATES 0.50% GERMANY 8-Nov Industrial Production (YoY) -1.00% 9-Nov Total Trade Balance (GBP/Mln) JAPAN 9-Nov Trade Balance - BOP Basis B 10-Nov Machine Orders YOY% 2.10% Initial Jobless claims decreased by 9000 to 397,000 from earlier week revised figure of 408,000 for the week ended October 29,2011 Continuing claims decreased by 15,000 to million for the week ended Oct 22, 2011 from earlier revised claims of million of previous week. UK & Europe: Asia: UK mortgage approvals fell in month of September. Lenders granted 50,967 loans to buy homes, down from 52,347 in month of August. UK Service Index fell more than forecast in October. The gauge of service Industry declined to 51.3 from 52.9 in month of October. Germany s unemployment rate rose in the month of October. The Jobless rate rose to 7% from 6.9% recorded in earlier month Japan s vehicle sales rose 28.30% in the month of October compared to 1.30% rise in month of September. Japan s construction orders dropped 9.3% YoY for the month of October compared to rise of 9.3% in the previous month. CURRENCY, CRUDE & G-SEC 10.84% Primary Articles Inflation 11.75% 11.18% 10.60% 12.08% USD-JPY Oct 1-Nov 2-Nov 3-Nov 4-Nov USD - INR Oct 1-Nov 2-Nov 3-Nov 4-Nov Crude($/bbl) Govt.Yield 24-Sep 1-Oct 8-Oct 15-Oct 22-Oct Oct 1-Nov 2-Nov 3-Nov 4-Nov 9.00% 8.90% 8.80% 8.70% 8.60% 8.50% 8.40% 8.30% 8.58% 8.79% 8.81% 8.85% 8.95% 7-Oct 14-Oct 21-Oct 28-Oct 4-Nov 2

3 PVR LTD (PVR) CMP (04/11/11): ` Rec: BUY Target: ` Upside: 33.5% Eq. Capital (FV `10): `25.90Crs Market Cap: `400.0 Crs Shareholding: Promoters %, FII-13.29%, Public & Others-18.68%, FIs & MFs-23.06% 52-w H/L: `177.50/93.50 Company Profile PVR Ltd (PVR) - one of the largest cinema chains in India is engaged in the business of film exhibition. The company, which began as a joint venture agreement between Priya Exhibitors Private Ltd and Village Roadshow Ltd, began its commercial operations in June 1997 with the launch of PVR Anupam in Saket, India's first multiplex. The company operates other business such as providing content, film distribution and Entertainment Park through its subsidiaries. It currently owns 154 screens over 15 cities and many more are in the offing. REVENUE MODEL the mix is changing 3.0% FY11 3.0% 1H % 6.4% 81.0% 90.7% Movie Exhibition Production & Distribution Movie Exhibition Production & Distribution Bowling Alleys Bowling Alleys INVESTMENT ARGUMENTS Indian Film Industry Strong Growth prospects going ahead India s Film industry is one of the largest in the world with more than 1200 movie releases and over 3 billion moviegoers annually. With an interesting line up of films in the industry is estimated to achieve a 9% growth to touch ~`91 billion in FY12E. In the long term, the industry is projected to grow at the CAGR of 9.6% between to reach the size of `132.1 billion by 2014E. With increase in disposable income and urbanization, the demand surge is expected to continue. Multiplexes are here to stay for Long We believe multiplexes are here to stay for long as they bring in the bulk of the revenue collections from movies. In India multiplexes currently accounts for only ~8% of screens presence and contributes ~60% if the Box Office collection. We believe the industry is likely to witness steady growth in coming years which will aloe bigger players like PVR to expand their footprint. Moreover, companies are increasingly investing in multiplexes, where revenues also come from add-on services such as food courts and bowling alleys. The number of multiplexes is expected to double over the next 5 years. 3

4 Diversified Entertainment company PVR has presence across entire movie value chain which includes exhibition, production as well as distribution. PVR has ventured into the movie distribution and production business through its now 100% subsidiary company PVR Pictures. The company has forayed in retail entertainment and management of food court through subsidiary PVR Blu-O Entertainment Ltd. to completely diversify its revenue streams. Massive expansion plans plans to treble its screen capacity in next 3 years With an eye to grow as a complete retail entertainment provider, PVR plans to invest ~`580 Crs to set up 6 entertainment cities and add ~350 screens (target of operating ~500) to its existing 154 across the country over the next 3 years. It has projects coming up in Ahmedabad, Surat, Chennai, Bangalore, Allahabad and Raipur. At present, PVR has 154 screens across 35 properties. The first of the entertainment cities will come up in Noida and it will house a state-of-the-art, 15-screen multiplex, with 4 gold class theatres, a lane bowling alley, an Olympic size ice skating rink, food courts, casual dining restaurants and a microbrewery, based beer island. Out of ~500 screens, PVR would set up ~100 screens in smaller towns and cities and would run on a lowcost model under PVR Talkies. It has lined up an investment of `300 Crs for the screen expansion programme, which would be funded through a mix of internal accruals and debt. The company sees considerable demand for theatres in tier II and tier III cities; however the pricing of tickets (on lower side) has a key bearing on footfalls. The company has done value engineering to reduce the cost per screen and so far the model has been quite successful. Backs to basics - Focus on strengthening its core Cinema Exhibition business PVR expertise lies in cinema exhibition which forms ~81% of the total revenue. In FY11, PVR financials were adversely impacted on account of poor performance of company s production Khelein Hum Jee Jaan Sey, that resulted in a loss of ` Crs at PAT level and after excluding Minority Interest the loss was `13.31 Crs. Post this, PVR has decided to focus aggressively on the cinema exhibition business and go slow on the production business for the next couple of years. So the company wanted to have 100% control over PVR Pictures and keep it as a wholly- owned subsidiary. Accordingly the company has now taken full control of its production arm, PVR Pictures by buying out the 40% stake of JP Morgan Mauritius Holdings and ICICI Venture's India advantage fund. The deal was valued at `600 mn after which PVR Pictures is now become wholly owned subsidiary of PVR and `400 mn was financed using the cash balance of PVR Pictures and the remaining through the standalone PVR entity. We believe the company's decision to quit the high-risk production business is a step in the right direction to avert losses. Recently, the Board of Directors in its meeting dated 08 th Aug. 2011, has approved a Composite Scheme of Arrangement entailing proposed demerger of the Production business undertaking of PVR Pictures with the Company and financial restructuring. PVR Blu-O the next growth driver and a high margins business PVR Blu-O consists of bowling alleys, karaoke centres and ice skating rinks. Company plans to set up new bowling lanes in Pune and Banglore. PVR currently has 2 PVR Blu-O centers operating in Gurgaon and Delhi with a total of 50 bowling lanes. The company has palns to add 74 lanes in FY12E out of which 26 lanes have already been added at a new location in New Delhi.The approximate cost of laying one bowling lane is around `5 mn. PVR plans to invest around `75 Crs over the next 3 year as the company mulls to expand operations of its bowling alley arm, PVR Blu-O, across cities like Bangalore, Pune, Chennai and Mumbai, Chandigarh and Ludhiana. PVR Blu-O is a 51:49 J.V between PVR and Thailand's Cineplex Group. The company expects 250 lanes to become operational over the next 2 years and work has already begun on 4 centers. 4

5 PVR Blu-O had recently launched a 26-lane center in Delhi. Apart from bowling, the center has lounges, tattoo studio and private karaoke lounge. PVR plans to open a 28-lane facility in Bangalore this fiscal. In the next two years, the company expects this segment to contribute `100 Crs to its topline and this business has very good EBIT margin of ~20% which implies `20 Crs addition to EBIT. We believe PVR Blu-O works as a standalone entertainment hub and helps in making the PVR brand visible among the moviegoing crowd. Impressive Shareholding SBI Mutual Fund has hiked its stake by ~2% during 2Q12 Source: Capitaline, Company VALUATIONS At the CMP of `154.45, the stock is trading at 7.5x its FY12E EPS of ` We recommend BUY on the stock with a months target price of `206.10, providing an upside of 33.5% from the current levels. Profit & Loss A/c - Consolidated - ` Crs FY09 FY10 FY11 Net Sales Total Expenditure Raw Material Consumed Purchase of Finished Goods Employee Expenses Power, Oil & Fuel Selling & Adm. Expenses Other Expenses EBITDA Margin 13.41% 10.24% 18.66% Depreciation EBIT Interest Other Income PBT PAT Minority Interest After NP PAT after Minority Interest Margin 2.47% 0.40% 1.79% EPS (`) Source: Company, Capitaline 5

6 Registered Office: 124 Viraj, S,V.Road, Khar (W), Mumbai Tel. (022) , Fax (022) LMSPL Network: Fort, Mahalaxmi, Parel, Bandra, Santacruz, Vile Parle, Andheri, Malad, Kandivili, Borivali, Bhayender, Ghatkopar, Mulund, Chunabhatti, Jacob Circle, Masjid Bunder, Cotton Green, Thane, Bhiwandi, Panvel, Pune, Sholapur, Nasik, Malegoan, Ahmednagar, Aurangabad, Akola, Mahekar, Nagpur, Surat, Karjan(Baroda), Khambat, Ahmedabad, Rajkot, Surendranagar, Porbandar, Amreli, Bharuch, Anand, Chennai, Vishakhapatnam, Vizianagaram, Palasa, Kakinada, Karnal, Kolkatta, Bhubhaneshwar, Hyderabad, Bangalore, Jafrabad, Chital, Kodinar, Keshod, Gondal, Haryana, Srikakulam, Mehkar (Buldhana, Jamnagar, Bangalore, Jodhpur, Jalgaon, Malkangiri (Orissa), Karimnagar Dist. (Andhra Pradesh). This document is for information only and is meant for the use of the recipient & not for circulation. The information contained in this document has been taken from publicly available information, trade and statistical services & other sources. While the information contained herein is from sources believed to be reliable, we do not hold ourselves responsible for its completeness and accuracy. All opinions and estimates included in this report constitute our judgement as of this date and are subject to change without notice. Investors are expected to use the information contained in this report at their own risk. This report is not and should not be construed as an offer or the solicitation of an offer to buy or sell any securities. M/s Latin Manharlal Securities Pvt. Ltd. and it s affiliates may act as market maker or have assumed an underwriting position in the secureties of companies discussed herein and may sell them to or buy them from customers on a principal basis. 6