Indian film exhibition is an oligopolistic market and top four players control 70-73 percent of the total screens in the country.
Within the top four, PVR Cinemas and INOX Leisure Limited are best placed to increase their market share further, both organically and inorganically. Both these companies seem to have entered a kind of virtuous cycle with internal cash flow and network effect coming into play. The other two players are Cinepolis and Carnival Cinemas.
Within PVR and INOX, the former enjoys a higher valuation when compared to the latter. Primarily, the higher valuations are justified as PVR beat INOX in all growth parameters. PVR is trading at 28 times FY21E against INOX at 22 times FY21E.
From the table above, PVR’s 5-year revenue CAGR (Compound Annual Growth Rate) stood at 23.7 percent against INOX's 12 percent. Also, PVR enjoyed higher EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins.
However, INOX's 5-year PAT (Profit After Tax) CAGR stood at 44.2 percent against PVR’s 23.2 percent. Primarily, PVR's finance cost jumped from Rs 37 crore on March 13 to Rs 84 crore on March 18.
Screens And Market Share
PVR owns 748 screens across pan India with a market share of 27 percent, while INOX has 557 screens with a market share of 20 percent. On the geographical reach, PVR remains equally strong across regions, while INOX remained strong in the West at 43 percent of the screens and equally in the North and South regions.
Occupancy And Footfalls
PVR enjoys higher occupancy levels at 34 percent, while INOX at 27 percent (YTD 9MFY19). Around 99 million people visited PVR, INOX was visited by 59 million.
Other Financial Analysis Return Ratio
INOX enjoys higher ROE (Return On Equity) and almost equal ROCE (Return On Capital Employed) when compared to PVR. INOX’s FY18 ROE stood at 19 percent against PVR’s 12 percent. INOX’s ROE stood at 14 percent, while PVR’s at 15 percent.
Valuations Management Guidance
PVR: Guided 20 percent growth to continue in FY20.
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