PVR: Box-office blues

Not too many people appear to have watched films in its theatres in the March 2008, quarter, which is possibly why multiplex operator PVR's revenues were up just 33 per cent over the previous year period.

That resulted in a sharp fall in the operating profit margins (opm) for the stand-alone operations, of 350 basis points, to 13 per cent. With margins coming off, the net profits for the quarter were up a disappointing 23 per cent.

The March quarter is not the best of seasons for theatre owners; moreover a number of films didn't fare too well at the box-office. That was seen in the lower than expected occupancy levels of just 32 per cent as against 36.2 per cent in the March 2007 quarter.

What helped the company was an increase in ticket prices and the fact that the audience spent more on food and beverages.

PVR had a good FY08 though, with higher footfalls of close to 18 million and consolidated revenues "" including sales from film production and distribution""rising 50 per cent to Rs 266 crore. Sales were driven by the addition of 16 new screens and the opm rose by 300 basis points to16 per cent.

By the end of FY09, PVR plans to have 125 screens and it is investing around Rs 80-100 crore to produce films; it hopes to release four films this year which it will co-produce. While PVR has produced films successfully so far, the film production and distribution businesses remains a fairly risky business.

In 2008 for instance there have been very few hits at the box office. With the June quarter likely to have seen smaller audiences thanks to the IPL cricket matches PVR should close FY09 with revenues of Rs 360 crore, higher by 35 per cent over FY08 and an earnings per share of around Rs 12.75, also a rise of 35 per cent.

At the current price of Rs 173, the stock discounts the FY09 estimated earnings by 13.6 times and is reasonably valued.