PVR Cinemas

PVR Ltd - Stock Update.

The outlook on exhibition stocks is cautious which is underpinned by likely delays on property handover front given delays from real estate developers and a weak macro for consumption that is expected to adversely impact property footfalls and occupancies.

For PVR new investments towards retail entertainment formats and other allied ventures will likely drag earnings over FY09-10 and come in the backdrop of an adverse macro that will delay business break-evens.

The consolidated margins will struggle over the medium term, with limited available levers, as operators counter a rising cost base (new properties), slowing revenues (lower occupancies) and investments towards business lines. Also likely peaked ATP's and SPH's will be another pressure point.

Ther is no immediate catalysts as focus will remain on macro for consumption and timely handovers from real estate developers. The DCF based methodology for valuing the stock works out to a price target of Rs.86.