December 19, 2008

PVR Rs 85 |BUY
Market Cap : 195 Cr Face Value : 10 Equity : 23 Cr

Improving average ticket price, strength in food and beverages sales and continuing strength in
garnering advertising revenues makes PVR, our most comfortable and preferred pick in the
media and entertainment space in the current scenario.

PVR, a leading player in the Indian multiplex and exhibition space, has around 101 screens across
25 locations in 14 cities in the country. PVR enjoys highest occupancy rate in the multiplex
industry. The Companys revenue stream is now well diversified, with its production business
successfully commencing operations.

Investment Rationale
Shareholding Pattern
The potential for the film industry is high for a country such
as India, where there is a lack of alternative sources of
affordable entertainment. A recent report of PWC-FICCI on
Public
Indian entertainment and media industry, expects the film 19%
industry to grow annually at 13 % and domestic box-office Promot
collection to grow at 11 %. er
Domesti 41%
c Inst
Ticket pricing and other businesses expand 19%

Ticket sales and revenue share from screens FII's

(franchisee developers) operations contribute over 21%

60 per cent of revenues. PVR has seen its average

ticket price, improve continuously over the last five
quarters to Rs 140 currently. This has been made possible by a hybrid pricing model adopted
by the company, depending on the location where it operates.

The spending per head on other utilities such as food and beverages has also been impressive.
This is a relatively high-margin business, which has increased its contribution to revenues to
nearly 21 per cent currently, and is growing by over 30 per cent annually.

Advertising revenue gaining strength

Advertising, the other key contributor to revenues (13%) has seen increasing growth rates.
From 59 per cent growth in 2008, it has improved to over 65 per cent in the first half of this
year.

Movies and distribution look good

PVR Pictures, a 100% subsidiary, is in the business of producing and distributing films.
 December 19, 2008

It has as co-produced films such as Taare Zameen Par which was a runaway hit. PVR has
consistently accounted for over 10 % of collections of movie revenues from its screens. In
movies such as the hits Jab We Met and Taare Zameen Par, this figure went to over 18 per
cent.

This division has received an investment of Rs 120 Crores from JP Morgan and ICICI
Venture in June 2008 Morgan (20% stake for 60 Crores each).The deal values the whole
business at Rs 300 Cr.

PVR Picture hopes to produce 8-10 films over the next year.

Alternative entertainment business

Going forward, PVR plans to start its alternative entertainment business by rolling out
bowling-alleys and video game arcades and plans to open its first centre very shortly.

Concerns
A decline in occupancy levels, largely due to lower footfalls on the back of terror attacks and threats,
and a slowdown in the real-estate market, forcing developers to decrease pace of development in
malls and multiplexes, are areas of concern.

However, there is a seasonality associated with movie screens as the December and June quarter are
the usually stronger ones.

Outlook and Valuation

PVR is emerging as a strong entertainment conglomerate with complete integration across the entire
film value chain and entry into exhibition related retail entertainment businesses. At Rs 85, the stock
trades at 6.5 times its likely 2008-09 per share earnings of Rs13. This is at a discount to the multiple
that Inox Leisure enjoys, despite PVR having a bigger scale of operation in terms of the number of
screens operated and better profit margins (over eight per cent), the highest among listed movie
exhibition players.

We expect the company valuation to be re-rated as it aggressively scales up its new ventures.

We maintain a BUY rating on the stock with a One year Target Price of Rs 150.

Financial Snapshot
For the second quarter of FY 08-09, PVR has reported a Revenue and Net profit of Rs 80 Cr and 8 Cr.

FY07 FY08 FY09(E) FY10(E)

Revenue ( Cr) 178 266 350 575
Net Profit (Cr) 10 22 30 50
EPS 4 9 13 22

Disclaimer: This not is prepared by Equity Intelligence India Private Ltd. as part of the research process with regards
to its Portfolio Management Service. This document is for the information of its PMS clients only.