pvr ltd result update...cinemas in october for customers booking through pvr web/app and bookmyshow....
TRANSCRIPT
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 1 of 12
Before reading this report, you must refer to the disclaimer on the last page.
PVR Ltd Absolute : LONG
Relative : Overweight
2QFY19 Result: Estimate (), TP (), Rating () Regular Coverage 17% ATR in 17 Months
SPI Cinemas to accelerate growth trajectory for PVR — maintain LONG Media & Entertainment
© 2018 Equirus All rights reserved
Rating Information
Price (Rs) 1,284
Target Price (Rs) 1,594
Target Date 31st Mar'20
Target Set On 25th Oct'18
Implied yrs of growth (DCF) 15
Fair Value (DCF) 1,541
Fair Value (DDM) NA
Ind Benchmark NSEMED
Model Portfolio Position NA
Stock Information
Market Cap (Rs Mn) 60,015
Free Float (%) 79.75 %
52 Wk H/L (Rs) 1568.45/1062.8
Avg Daily Volume (1yr) 3,70,634
Avg Daily Value (Rs Mn) 495
Equity Cap (Rs Mn) 467
Face Value (Rs) 10
Bloomberg Code PVRL IN
Ownership Recent 3M 12M
Promoters 20.3 % 0.0 % 0.0 %
DII 30.2 % 1.0 % 3.8 %
FII 39.5 % -1.5 % -1.9 %
Public 10.0 % 0.4 % -1.9 %
Price % 1M 3M 12M
Absolute 2.4 % 12.8 % -7.5 %
Vs Industry 8.6 % 29.8 % 15.5 %
Inox Leisure -10.7 % -0.3 % -11.3 %
Mukta Arts -9.6 % -12.3 % -60.3 %
Consolidated Quarterly EPS forecast
Rs/Share 1Q 2Q 3Q 4Q
EPS (18A) 9.2 5.3 6.0 5.4
EPS (19E) 10.8 6.8 11.3 6.8
PVRL’s 2QFY19 revenues grew ~28% yoy to ~Rs 7.1bn (+4% vs. EE) driven by box-office
(+25% yoy), F&B (+37% yoy) and advertising (+18% yoy) revenues. Overall footfalls at
21.4mn grew ~25% yoy on a 9% growth in comparable footfalls and addition of 2mn
footfalls from the acquisition of SPI Cinemas (SPI). EBITDA at Rs 1.24bn was up ~35% yoy
(+8% vs. EE) as EBITDAM expanded by ~100bps mainly due to the consolidation of SPI with
standalone EBITDAM remaining flattish. PVRL is set to benefit from (a) its unmatched
presence in tier-1 cities, (b) expansion in the South and (c) an improved content pipeline.
We expect revenue/EBITDA/PAT CAGR of 21%/28%/38% over FY18-FY21E and broadly
maintain our FY19/FY20 estimates. Reiterate LONG with a Mar’20 TP of Rs 1,594 set at a
32x TTM P/E (TP, P/E multiple unchanged).
New screen additions, SPI acquisition to keep up growth momentum: PVRL completed
the SPI acquisition in mid-Aug, with 2QFY19 thus reflecting ~1.5 months of the latter’s
contribution. Given the higher occupancy ratios of SPI and a strong content pipeline
(Thugs of Hindostan, Fantastic Beasts, 2.0, Simba) for the rest of FY19, we expect
acceleration in footfall growth. Along with SPI, PVRL has already added 7 properties and
34 screens YTD. Management stated it is on track to achieve 99 screen additions for full-
year FY19 (91 screens for base business, 8 for SPI).
F&B revenues solid despite price cuts in some markets: F&B revenues for the base
business increased ~25% yoy despite a ~3% yoy decline in SPH as (a) the conversion ratio
improved and (b) the GST rate on F&B products came down to 5% from 18% earlier.
Contribution margin for F&B declined to ~73.3% in 2QFY19 vs. 73.9% in 2QFY18 mainly due
to unavailability of input tax credit and rationalization of F&B pricing. Although
advertising revenue growth for the base business slowed down in 1HFY19 (+10% yoy),
management has guided for >15% growth for full-year FY19 as it plans to get the
maximum out of its strong pipeline in the next two quarters.
Maintain LONG with a Mar’20 TP of Rs 1,594: Management reassured that SPH would
soon be back on the growth track and has guided for SPH growth of ~5% in 2HFY19. Also,
it is confident about adding 22 screens in 3QFY19 and 43 in 4QFY19 to achieve full-year
guidance of 99 screens. We expect revenue/EBITDA/PAT CAGR of 21%/28%/38% over
FY18-FY21E and broadly maintain our FY19/FY20 estimates. Reiterate LONG with a Mar’20
TP of Rs 1,594 set at a 32x TTM P/E (TP, P/E multiple unchanged). Key risk: Prolonged
slowdown in mall development across the country.
Change in Estimates
Rs. Mn FY19E Chg (%) FY20E Chg (%)
Sales 29,840 2% 36,504 3%
EBITDA 5,513 4% 6,929 2%
EPS 36.9 -1% 49.8 0%
Consolidated Financials
Rs. Mn YE Mar FY18A FY19E FY20E FY21E
Sales 23,341 29,840 36,504 41,433
EBITDA 4,018 5,513 6,929 8,412
Depreciation 1,537 1,838 2,194 2,476
Interest Expense 837 1,108 1,306 1,226
Other Income 313 187 219 242
Reported PAT 1,247 1,724 2,408 3,268
Recurring PAT 1,253 1,724 2,408 3,268
Total Equity 10,754 12,478 17,466 20,735
Gross Debt 8,305 12,805 13,305 12,505
Cash 339 821 1,395 1,584
Rs Per Share FY18A FY19E FY20E FY21E
Earnings 26.8 36.9 49.8 67.6
Book Value 230 267 361 429
Dividends 2.0 2.6 3.5 4.7
FCFF 20.2 -121.8 46.0 62.5
P/E (x) 47.9 34.8 25.8 19.0
P/B (x) 5.6 4.8 3.6 3.0
EV/EBITDA (x) 16.9 13.5 10.6 8.5
ROE (%) 12 % 15 % 16 % 17 %
Core ROIC (%) 9 % 10 % 10 % 12 %
EBITDA Margin (%) 17 % 18 % 19 % 20 %
Net Margin (%) 5 % 6 % 7 % 8 %
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 2 of 12
Quarterly performance, consolidated
2QFY19 2QFY19E 1QFY19 2QFY18 % Change
Comments 2QFY19E 1QFY19 2QFY18
Net Sales 7,086 6,788 6,963 5,554 4% 2% 28%
Movie Exhibition Cost 1,650 1,519 1,663 1,335 9% -1% 24%
Consumption of Food and Beverages 543 505 508 385 8% 7% 41%
Employee Benefits Expense 770 805 742 587 -4% 4% 31%
Other Expenses 2,882 2,811 2,678 2,332 3% 8% 24%
Total Operating Expenses 5,845 5,639 5,591 4,638 4% 5% 26%
EBITDA 1,240 1,149 1,372 916 8% -10% 35%
Depreciation 448 458 401 357 -2% 12% 25%
EBIT 792 691 971 558 15% -18% 42%
Interest 298 241 208 207 24% 43% 44%
Other Income 61 43 43 42 41% 43% 47%
PBT 555 493 805 393 13% -31% 41%
Tax 212 168 283 140 26% -25% 51%
PAT before MI & Associates 344 325 522 253 6% -34% 36%
Minority Interest -12 -10 1 5 21% -1173% -362%
Profit from Assoc. -2 0 -2 0 NA -17% NA
Recurring PAT 330 316 522 258 5% -37% 28%
Extraordinaires 0 0 0 6 NA NA -100%
Reported PAT 330 316 522 252 5% -37% 31%
EPS (Rs) 6.8 6.5 10.8 5.3 5% -37% 28%
Gross Margin 69.0% 70.2% 68.8% 69.0% -115 bps 22 bps 0 bps
EBITDA Margin 17.5% 16.9% 19.7% 16.5% 57 bps -220 bps 102 bps
EBIT Margin 11.2% 10.2% 13.9% 10.1% 100 bps -276 bps 113 bps
PBT Margin 7.8% 7.3% 11.6% 7.1% 57 bps -373 bps 76 bps
PAT Margin 4.7% 4.6% 7.5% 4.5% 1 bps -283 bps 13 bps
Tax Rate 38.1% 34.0% 35.2% 35.6% 412 bps 296 bps 254 bps
Key Operational Metrics
Footfalls (mn) 23.4 22.1 22.7 18.7 6% 3% 25%
Average Ticket Price (Rs) 206 204 217 204 1% -5% 1%
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 3 of 12
Earnings call takeaways
Box-office highlights
▪ Top-5 films accounted for ~44% of GBOC for 2QFY19 vs. ~29% for 2QFY18. Sanju,
Stree, Gold and Mission Impossible: Fallout were the major hits for 2QFY19.
▪ Overall footfalls for the quarter grew ~25% yoy to 23.4mn. Growth was mainly led by
~9% growth in comparable footfalls in the standalone business and addition of ~2mn
footfalls from SPI Cinemas.
▪ Overall occupancies for 2QFY19 stood at ~34.6%, standalone business occupancy at
~33.4% (+380bps yoy) and SPI occupancy at ~54.7% (weaker than FY18 occupancy of
58%).
▪ Average Ticket Price (ATP) for the standalone business grew ~3% yoy to Rs 211
whereas blended ATP came in at Rs 206 due to SPI Cinema’s lower ATP of Rs 154.
▪ Share of content in 2QFY19: Bollywood 61%, Hollywood 20% and Regional 19%. For
2QFY18, the share of content was as follows: Bollywood 57%, Hollywood 22% and
Regional 21%.
▪ Footfalls increased only slightly due to issues between an aggregator and a major
multiplex player in Sep’18.
▪ Overall online admissions have touched 54.5-55% as of now. GBOC contribution would
be to the tune of 57.5-60%.
F&B updates
▪ Standalone SPH for 2QFY19 declined to ~Rs 88 (-3% yoy). However, the company was
able to grow F&B revenues by ~25% yoy mainly due to a higher conversion ratio. Net
revenue looks higher due to a downward revision in GST rates to 5% from 18% earlier.
▪ Standalone contribution margin for F&B declined to ~73.3% in 2QFY19 vs. ~73.9% in
2QFY18 and 75.1% in 1QFY19 mainly due to unavailability of input tax credit in the
new regime (effective Nov’17) and rationalization of F&B pricing.
▪ Prices were severely (30-40%) cut only in MH, while several F&B promotions were
introduced. However, this strategy did not work in non-peak hours. Water has been
subsidized across screens.
▪ SPH for SPI Cinemas is also in the range of PVRL’s standalone business.
▪ SPH would grow by ~5% in 2HFY19.
Other highlights
▪ PVRL added 3 properties and 13 screens in 2QFY19. YTD, it has added 7 properties
and 34 screens (including 1 property and 4 screens for SPI Cinemas).
▪ Management has guided to add a total of 99 screens in FY19 (including 8 screens of
SPI Cinemas). The company would add 22 screens in 3QFY19 and 43 in 4QFY19.
▪ Acquisition of SPI Cinemas was completed on 17 Aug’18 (71.7% stake). By FY19-end,
the company would be able to close the merger process (entire 100% stake).
▪ To encourage early booking, PVRL has launched a seat cancellation feature across all
cinemas in October for customers booking through PVR web/app and BookMyShow.
Cancellation fees vary from 25-50%, depending on the time of ticket cancellation.
▪ Bulk of growth in advertising revenues would come in 3Q and 4QFY19. Management
has guided for 15-17% growth in advertising revenues for FY19.
▪ About 20% of advertising revenues are local in nature whereas rest are corporate.
Delhi, Mumbai and Bangalore are the most ad-revenue generating markets.
▪ Currently, Local Body Tax is applicable in TN only (more specifically in Chennai,
Coimbatore and another city). Recently, Bhopal and Indore municipal councils have
announced the levy of LBT. The Multiplex Association of India is in constant
engagement with the Government of MP and local officials to withdraw LBT. The
contribution of MP in PVRL’s overall footfalls is insignificant.
▪ Capex for FY19 would be Rs 4.25bn-4.5bn (without SPI). SPI capex would be
Rs 200mn-250mn.
▪ Post GST, the company has not reported any subsidy; FY19 subsidy should be
Rs 100mn-120mn but the company has not been accounting any of this.
▪ As of now, the total no of premium screens stands at 62.
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 4 of 12
Exhibit 1:Proportion of F&B and advertising has been increasing in the revenue mix
Source: Company, Equirus Securities; for Standalone business
Exhibit 2:Occupancy for 2QFY19 expanded by ~380bps yoy
Source: Company, Equirus Securities; for Standalone business
Exhibit 3: Comparable footfalls grew at a healthy 9% during 2QFY19
Source: Company, Equirus Securities; for Standalone business
Exhibit 4:On an average, ATP growth has been in line with inflation
Source: Company, Equirus Securities; for Standalone business
57% 55% 53% 55% 56% 56% 53% 55% 56% 54%
27% 27% 26% 27% 27% 27% 26% 28% 30%27%
10% 12% 15% 11% 11% 13% 16% 13% 11%12%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Net Box Office Food & Beverages Advertising/Sponsorship
Convenience Income Other Operating Income
20.7 18.5 17.9 18.2 21.0 18.7 17.4 19.0 22.7 21.4
36.2%
31.9% 32.0% 31.6%
35.1%
29.6%29.1%
31.5%
35.9%
33.4%
15%
20%
25%
30%
35%
40%
0
5
10
15
20
25
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Footfalls (mn) Occupancy (%)(RHS)
1% 1%
-3%
4%
8%
14%
-7%
-5%-6%
-3%
2%
9%
-10%
-5%
0%
5%
10%
15%
20%
2018 2018 2018 2018 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2
Overall Footfalls Growth (%) Comparable Footfalls Growth (%)
195 202 199 190 214 204 212 209 217 211
7%
8%
-1%
4%
10%
1%
7%
10%
1%
3%
-2%
0%
2%
4%
6%
8%
10%
12%
50
70
90
110
130
150
170
190
210
230
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
ATP (Rs) Growth (Yoy%)(RHS)
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 5 of 12
Exhibit 5: SPH as a percentage of ATP came down to ~42% in 2QFY19
Source: Company, Equirus Securities; for Standalone business
Exhibit 6: F&B contribution margin contracted by ~60bps in 2QFY19
Source: Company, Equirus Securities; for Standalone business
Exhibit 7: Distributor share would be in the range of 44-45% going ahead
Source: Company, Equirus Securities; for Standalone business
Exhibit 8: Trend in advertising and other operating revenues/screen
Source: Company, Equirus Securities; for Standalone business
79 84 82 78 87 91 92 87 94 88
40.5% 41.6% 41.2% 41.1% 40.7%
44.6%43.4%
41.6%43.3%
41.7%
10%
15%
20%
25%
30%
35%
40%
45%
50%
40
50
60
70
80
90
100
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
F&B SPH (Rs) % of ATP (RHS)
76.8%76.1% 75.8%
75.2%76.1%
73.9% 74.2%73.8%
75.1%
73.3%
65%
67%
69%
71%
73%
75%
77%
79%
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
F&B Contrubution Margin
41.1%
45.0% 45.0%
43.3% 43.5%
46.2% 45.8%
42.8%
44.4% 44.7%
30%
32%
34%
36%
38%
40%
42%
44%
46%
48%
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Distributor Share on NBOC (%)
1.01.1
1.4
0.91.2 1.2
1.5
1.2 1.1 1.2
0.4
0.4
0.3
0.4
0.4 0.4
0.4
0.50.4
0.6
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2017 2017 2017 2017 2018 2018 2018 2018 2019 2019
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Other Operating Revenue per Screen (Rs. mn) Advertising Revenue per Screen (Rs. mn)
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 6 of 12
Company Snapshot
How we differ from Consensus
- Equirus Consensus % Diff Comment
EPS FY19E 36.9 37.9 -3 % Consensus numbers may not be updated
after 2QFY19 results FY20E 49.8 48.7 2 %
Sales FY19E 29,840 27,859 7 %
FY20E 36,504 32,655 12 %
PAT FY19E 1,724 1,781 -3 %
FY20E 2,408 2,308 4 %
Key Estimates:
Revenue (Rs mn) FY17 FY18 FY19E FY20E FY21E
Box Office 11,249 12,471 15,716 19,288 21,832
Food & Beverages 5,781 6,243 8,598 10,591 12,231
Advertising 2,518 2,969 3,581 4,368 4,992
Other Operating Revenue 1,647 1,658 2,017 2,258 2,378
Operational Metrics FY17 FY18 FY19E FY20E FY21E
Footfalls (mn) 75.2 76.1 97.1 116.9 128.0
Occupancy Rate (%) 33% 31% 34% 36% 36%
Average Ticket Price (Rs) 196 210 208 211 218
F&B Spend Per Head (Rs) 81 89 91 94 99
Ad Revenue/Screen (Rs. mn) (SA) 4.5 5.0 5.2 5.6 6.0
Key Triggers
a) Improvement in quality of content to result into higher comparable footfalls
b) Favorable judgement on the F&B issue by the Supreme Court of India
c) Higher share of in-cinema advertising in the overall advertising pie
Key Downside Risks
a) Prolonged slowdown in mall development across the country can hamper
expansion plans
b) Any regulations on ticket/F&B pricing can have adverse effect on revenues
c) Rise of OTT platforms could narrow the theatrical release window in the long
term
DCF Valuations & Assumptions
Rf Beta Ke Term. Growth Debt/IC in Term. Yr
8.0 % 1.0 13.8 % 4.0 % 35.0 %
- FY19E FY20E FY21-23E FY24-28E FY29-33E
Sales Growth 28 % 22 % 14 % 13 % 11 %
NOPAT Margin 8 % 9 % 10 % 10 % 11 %
IC Turnover 0.99 1.15 1.40 1.86 2.52
RoIC 9.7 % 10.1 % 14.1 % 19.8 % 28.1 %
Years of strong growth 1 2 5 10 15
Valuation as on date (Rs) -22 132 490 923 1,281
Valuation as of Mar'20 -27 159 590 1,110 1,541
Based on DCF, we derive a fair value of Rs 1,281 as on today and Rs 1,541 as on 31
Mar’20.
Company Description:
PVR Ltd (PVRL), started in 1997, is India’s largest multiplex cinema chain. PVR has
introduced various movie screening formats across the country to cater to all kinds of
customers. PVR currently has 154 theatres and 715 screens spread across 60 Indian cities.
To enhance presence in the underpenetrated South Indian market, it recently acquired
SPI Cinemas with an existing circuit of 76 screens in 10 cities. Other complementary
businesses of the company include movie distribution (PVR Pictures), Gourmet Popcorn
Manufacturing (Zea Maize) and movie-on-demand (Vkaao).
Comparable valuation Mkt Cap
Rs. Mn.
Price
Target Target Date
EPS P/E BPS P/B RoE Div Yield
Company Reco. CMP FY18A FY19E FY20E FY18A FY19E FY20E FY18A FY19E FY18A FY19E FY20E FY18A FY19E
PVR Cinemas LONG 1,284 60,015 1,594 31st Mar'20 26.8 36.9 49.8 47.9 34.8 25.8 230.1 4.8 12 % 15 % 16 % 0.2 % 0.2 %
Inox Leisure LONG 202 19,449 275 31st Mar'20 7.2 9.6 11.4 28.0 21.0 17.7 69.6 2.6 11 % 13 % 13 % 0.0 % 0.0 %
Mukta Arts NA 38 865 NA NA -2.1 - - -18.0 - - 15.0 - -14 % - - 0.0 % -
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 7 of 12
Consolidated Quarterly Earnings Forecast and Key Drivers
Rs in Mn 1Q18A 2Q18A 3Q18A 4Q18A 1Q19A 2Q19A 3Q19E 4Q19E 1Q20E 2Q20E 3Q20E 4Q20E FY18A FY19E FY20E FY21E
Revenue 6,366 5,554 5,573 5,849 6,963 7,086 8,044 7,747 9,378 8,939 9,346 8,841 23,341 29,840 36,504 41,433 Movie Exhibition Cost 1,449 1,335 1,323 1,271 1,663 1,650 1,783 1,671 2,179 2,065 2,089 1,935 5,377 6,767 8,268 9,376
Consumption of Food and Beverages 413 385 379 414 508 543 604 591 722 677 690 665 1,591 2,246 2,754 3,160
Employee Benefits Expense 679 587 622 653 742 770 854 886 989 934 980 1,006 2,541 3,252 3,908 4,395
Other Expenses 2,682 2,332 2,234 2,567 2,678 2,882 3,189 3,312 3,681 3,696 3,591 3,676 9,815 12,061 14,644 16,089
- - - - - - - - - - - - - - - - - EBITDA 1,144 916 1,015 944 1,372 1,240 1,614 1,287 1,808 1,566 1,995 1,559 4,018 5,513 6,929 8,412 Depreciation 399 357 386 394 401 448 494 494 549 549 549 549 1,537 1,838 2,194 2,476 EBIT 744 558 629 550 971 792 1,120 793 1,260 1,018 1,446 1,011 2,482 3,675 4,735 5,936 Interest 208 207 212 210 208 298 301 301 326 326 326 326 837 1,108 1,306 1,226 Other Income 164 42 32 75 43 61 42 42 55 55 55 55 313 187 219 242 PBT 700 393 449 415 805 555 860 534 988 746 1,175 739 1,958 2,754 3,648 4,952 Tax 258 140 154 153 283 212 293 181 336 254 399 251 704 969 1,240 1,684 PAT bef. MI & Assoc. 443 253 296 262 522 344 568 352 652 492 775 488 1,253 1,786 2,408 3,268 Minority Interest -2 -5 3 -3 -1 12 24 24 0 0 0 0 -7 58 0 0 Profit from Assoc. 0 0 -4 -3 -2 -2 0 0 0 0 0 0 -7 -3 0 0 Recurring PAT 445 258 289 262 522 330 544 328 652 492 775 488 1,253 1,724 2,408 3,268 Extraordinaries 0 6 0 0 0 0 0 0 0 0 0 0 6 0 0 0 Reported PAT 445 252 289 262 522 330 544 328 652 492 775 488 1,247 1,724 2,408 3,268
EPS (Rs) 9.20 5.33 5.97 5.42 10.79 6.83 11.25 6.80 13.49 10.18 16.04 10.09 26.81 36.89 49.81 67.62
Key Drivers
Footfalls (mn) - - - - - - - - - - - - 76.1 97.1 116.9 128.0 Occupancy (%) - - - - - - - - - - - - 31 % 34 % 36 % 36 % Average Ticket Price (Rs) - - - - - - - - - - - - 210 208 211 218 F&B Spend Per Head (Rs) - - - - - - - - - - - - 89 91 94 99 Ad Revenue/Screen (Rs. mn) - - - - - - - - - - - - 5.0 5.2 5.6 6.0
- - - - - - - - - - - - - - - - -
Sequential Growth (%)
Revenue 32 % -13 % 0 % 5 % 19 % 2 % 14 % -4 % 21 % -5 % 5 % -5 % - - - - Movie Exhibition Cost 30 % -8 % -1 % -4 % 31 % -1 % 8 % -6 % 30 % -5 % 1 % -7 % - - - - EBITDA 145 % -20 % 11 % -7 % 45 % -10 % 30 % -20 % 40 % -13 % 27 % -22 % - - - - EBIT 612 % -25 % 13 % -13 % 77 % -18 % 41 % -29 % 59 % -19 % 42 % -30 % - - - - Recurring PAT 2,966 % -42 % 12 % -9 % 99 % -37 % 65 % -40 % 99 % -25 % 57 % -37 % - - - -
EPS 2,966 % -42 % 12 % -9 % 99 % -37 % 65 % -40 % 99 % -25 % 57 % -37 % - - - -
Yearly Growth (%)
Revenue 13 % 2 % 5 % 21 % 9 % 28 % 44 % 32 % 35 % 26 % 16 % 14 % 10 % 28 % 22 % 14 % EBITDA 7 % 14 % 27 % 102 % 20 % 35 % 59 % 36 % 32 % 26 % 24 % 21 % 28 % 37 % 26 % 21 % EBIT 1 % 22 % 38 % 426 % 30 % 42 % 78 % 44 % 30 % 28 % 29 % 28 % 42 % 48 % 29 % 25 % Recurring PAT -2 % -12 % 21 % 1,707 % 17 % 28 % 88 % 25 % 25 % 49 % 43 % 49 % 25 % 38 % 40 % 36 %
EPS -2 % -12 % 21 % 1,707 % 17 % 28 % 88 % 25 % 25 % 49 % 43 % 49 % 25 % 38 % 35 % 36 %
Margin (%)
EBITDA 18 % 16 % 18 % 16 % 20 % 18 % 20 % 17 % 19 % 18 % 21 % 18 % 17 % 18 % 19 % 20 % EBIT 12 % 10 % 11 % 9 % 14 % 11 % 14 % 10 % 13 % 11 % 15 % 11 % 11 % 12 % 13 % 14 % PBT 11 % 7 % 8 % 7 % 12 % 8 % 11 % 7 % 11 % 8 % 13 % 8 % 8 % 9 % 10 % 12 %
PAT 7 % 5 % 5 % 4 % 7 % 5 % 7 % 4 % 7 % 6 % 8 % 6 % 5 % 6 % 7 % 8 %
* Ad revenue/screen pertains to standalone screens (ex-SPI Cinemas)
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 8 of 12
Consolidated Financials
P&L (Rs Mn) FY18A FY19E FY20E FY21E Balance Sheet (Rs Mn) FY18A FY19E FY20E FY21E Cash Flow (Rs Mn) FY18A FY19E FY20E FY21E
Revenue 23,341 29,840 36,504 41,433 Equity Capital 467 467 483 483 PBT 1,958 2,754 3,648 4,952
Op. Expenditure 19,323 24,326 29,575 33,020 Reserve 10,286 12,010 16,983 20,251 Depreciation 1,537 1,838 2,194 2,476
EBITDA 4,018 5,513 6,929 8,412 Networth 10,754 12,478 17,466 20,735 Others 802 921 1,087 984
Depreciation 1,537 1,838 2,194 2,476 Gross Debt 8,305 12,805 13,305 12,505 Taxes Paid 417 969 1,240 1,684
EBIT 2,482 3,675 4,735 5,936 Def Tax Liability 106 2,655 1,533 340 Change in WC 582 -542 -864 -997
Interest Expense 837 1,108 1,306 1,226 Minority Interest 8 2,565 0 0 Operating C/F 4,463 4,002 4,825 5,731
Other Income 313 187 219 242 Account Payables 2,511 2,914 3,564 4,053 Capex -3,385 -10,599 -3,679 -3,759
PBT 1,958 2,754 3,648 4,952 Other Curr Liabi 1,805 1,805 1,805 1,805 Change in Invest -278 0 0 0
Tax 704 969 1,240 1,684 Total Liabilities & Equity 23,488 35,221 37,672 39,437 Others -390 187 219 242
PAT bef. MI & Assoc. 1,253 1,786 2,408 3,268 Net Fixed Assets 11,554 17,185 18,670 19,953 Investing C/F -4,054 -10,412 -3,460 -3,517
Minority Interest -7 58 0 0 Capital WIP 1,017 1,017 1,017 1,017 Change in Debt 255 4,500 500 -800
Profit from Assoc. -7 -3 0 0 Others 7,940 13,565 13,565 13,565 Change in Equity 0 145 219 275
Recurring PAT 1,253 1,724 2,408 3,268 Inventory 198 277 340 390 Others -914 2,246 -1,508 -1,501
Extraordinaires 6 0 0 0 Account Receivables 1,556 1,472 1,800 2,043 Financing C/F -660 6,892 -790 -2,026
Reported PAT 1,247 1,724 2,408 3,268 Other Current Assets 885 885 885 885 Net change in cash -251 482 575 188
FDEPS (Rs) 26.8 36.9 49.8 67.6 Cash 339 821 1,395 1,584 RoE (%) 12 % 15 % 16 % 17 %
DPS (Rs) 2.0 2.6 3.5 4.7 Total Assets 23,488 35,221 37,672 39,437 RoIC (%) 10 % 10 % 10 % 11 %
CEPS (Rs) 59.7 76.2 95.2 118.8 Non-cash Working Capital -1,677 -2,085 -2,343 -2,539 Core RoIC (%) 9 % 10 % 10 % 12 %
FCFPS (Rs) 20.2 -121.8 46.0 62.5 Cash Conv Cycle -26.2 -25.5 -23.4 -22.4 Div Payout (%) 9 % 8 % 8 % 8 %
BVPS (Rs) 230.1 267.0 361.3 428.9 WC Turnover -13.9 -14.3 -15.6 -16.3 P/E 47.9 34.8 25.8 19.0
EBITDAM (%) 17 % 18 % 19 % 20 % FA Turnover 1.9 1.6 1.9 2.0 P/B 5.6 4.8 3.6 3.0
PATM (%) 5 % 6 % 7 % 8 % Net D/E 0.7 1.0 0.7 0.5 P/FCFF 63.5 -10.5 27.9 20.5
Tax Rate (%) 36 % 35 % 34 % 34 % Revenue/Capital Employed 1.2 1.2 1.1 1.2 EV/EBITDA 16.9 13.5 10.6 8.5
Sales Growth (%) 10 % 28 % 22 % 14 % Capital Employed/Equity 1.8 2.1 2.2 1.9 EV/Sales 2.9 2.5 2.0 1.7
FDEPS Growth (%) 25 % 38 % 35 % 36 % Dividend Yield (%) 0.2 % 0.2 % 0.3 % 0.4 %
TTM P/E vs. 2 yr forward EPS growth TTM EV/EBITDA vs. 2 yr forward EBITDA growth TTM P/B vs. 2 yr forward RoE
30x
40x
50x
60x
70x
-40%
-20%
0%
20%
40%
60%
80%
100%
120%
0
500
1000
1500
2000
2500
3000
3500
4000
Mar
/14
Jun/1
4
Sep/1
4
Dec/
14
Mar
/15
Jun/1
5
Sep/1
5
Dec/
15
Mar
/16
Jun/1
6
Sep/1
6
Dec/
16
Mar
/17
Jun/1
7
Sep/1
7
Dec/
17
Mar
/18
Jun/1
8
Sep/1
8
Dec/
18
Mar
/19
Jun/1
9
Sep/1
9
Dec/
19
Mar
/20
EPS Growth
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
20000
40000
60000
80000
100000
120000
140000
160000
Mar
/14
Jun/1
4
Sep/1
4
Dec/
14
Mar
/15
Jun/1
5
Sep/1
5
Dec/
15
Mar
/16
Jun/1
6
Sep/1
6
Dec/
16
Mar
/17
Jun/1
7
Sep/1
7
Dec/
17
Mar
/18
Jun/1
8
Sep/1
8
Dec/
18
Mar
/19
Jun/1
9
Sep/1
9
Dec/
19
Mar
/20
9x
12x
15x
18x
21xEBITDA Growth
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
500
1000
1500
2000
2500
3000
Mar
/14
Jun/1
4
Sep/1
4
Dec/
14
Mar
/15
Jun/1
5
Sep/1
5
Dec/
15
Mar
/16
Jun/1
6
Sep/1
6
Dec/
16
Mar
/17
Jun/1
7
Sep/1
7
Dec/
17
Mar
/18
Jun/1
8
Sep/1
8
Dec/
18
Mar
/19
Jun/1
9
Sep/1
9
Dec/
19
Mar
/20
RoE
3x
4x
5x
6x
7x
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 9 of 12
Historical Consolidated Financials
P&L (Rs Mn) FY15A FY16A FY17A FY18A Balance Sheet (Rs Mn) FY15A FY16A FY17A FY18A Cash Flow (Rs Mn) FY15A FY16A FY17A FY18A
Revenue 14,771 18,496 21,194 23,341 Equity Capital 415 467 467 467 PBT 146 1,569 1,569 1,958
Op. Expenditure 12,763 15,571 18,058 19,323 Reserve 3,677 8,345 9,183 10,286 Depreciation 1,168 1,151 1,384 1,537
EBITDA 2,008 2,924 3,136 4,018 Networth 4,092 8,812 9,650 10,754 Others 924 804 820 802
Depreciation 1,168 1,151 1,384 1,537 Gross Debt 7,470 6,600 8,196 8,305 Taxes Paid 69 202 331 417
EBIT 840 1,773 1,752 2,482 Def Tax Liability 94 67 80 106 Change in WC -617 222 -246 582
Interest Expense 783 840 806 837 Minority Interest 383 401 405 8 Operating C/F 1,553 3,543 3,196 4,463
Other Income 89 635 623 313 Account Payables 1,529 1,716 1,976 2,511 Capex -1,691 -2,343 -6,324 -3,385
PBT 146 1,569 1,569 1,958 Other Curr Liabi 720 1,376 1,950 1,805 Change in Invest -139 -513 499 -278
Tax 8 467 570 704 Total Liabilities & Equity 14,288 18,972 22,257 23,488 Others -224 -136 -496 -390
PAT bef. MI & Assoc. 138 1,102 999 1,253 Net Fixed Assets 7,766 9,139 10,750 11,554 Investing C/F -2,054 -2,992 -6,321 -4,054
Minority Interest -11 5 1 -7 Capital WIP 611 759 1,056 1,017 Change in Debt 1,337 -522 1,439 255
Profit from Assoc. 0 0 0 -7 Others 4,342 4,515 7,647 7,940 Change in Equity 100 3,522 10 0
Recurring PAT 149 1,097 999 1,253 Inventory 126 205 190 198 Others -949 -831 -847 -914
Extraordinaires 22 116 41 6 Account Receivables 767 901 1,021 1,556 Financing C/F 488 2,168 602 -660
Reported PAT 128 981 958 1,247 Other Current Assets 415 775 1,284 885 Net change in cash -14 2,720 -2,523 -251
EPS (Rs) 3.2 23.5 21.4 26.8 Cash 261 2,680 309 339 RoE (%) 4 % 17 % 11 % 12 %
DPS (Rs) 1.0 2.0 2.0 2.0 Total Assets 14,288 18,972 22,257 23,488 RoIC (%) 8 % 12 % 9 % 10 %
CEPS (Rs) 31.7 48.2 51.0 59.7 Non-cash Working Capital -942 -1,212 -1,431 -1,677 Core RoIC (%) 7 % 10 % 7 % 9 %
FCFPS (Rs) 5.7 24.5 -55.9 20.2 Cash Conv Cycle -23.3 -23.9 -24.6 -26.2 Div Payout (%) 39 % 11 % 12 % 9 %
BVPS (Rs) 98.5 188.8 206.5 230.1 WC Turnover -15.7 -15.3 -14.8 -13.9 P/E 402.0 54.7 60.1 47.9
EBITDAM (%) 14 % 16 % 15 % 17 % FA Turnover 1.8 1.9 1.8 1.9 P/B 13.0 6.8 6.2 5.6
PATM (%) 1 % 6 % 5 % 5 % Net D/E 1.8 0.4 0.8 0.7 P/FCFF 224.5 52.5 -23.0 63.5
Tax Rate (%) 6 % 30 % 36 % 36 % Revenue/Capital Employed 1.3 1.3 1.2 1.2 EV/EBITDA 33.5 21.9 21.7 16.9
Sales growth (%) 10 % 25 % 15 % 10 % Capital Employed/Equity 2.8 2.2 1.9 1.8 EV/Sales 4.6 3.5 3.2 2.9
FDEPS growth (%) -72 % 635 % -9 % 25 % Dividend Yield (%) 0.1 % 0.2 % 0.2 % 0.2 %
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 10 of 12
Equirus Securities
Research Analysts Sector/Industry Email Equity Sales E-mail
Abhishek Shindadkar IT Services [email protected] 91-22-43320643 Vishad Turakhia [email protected] 91-22-43320633
Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631
Bharat Celly Healthcare [email protected] 91-79-61909524 Viral Desai [email protected] 91-22-43320635
Depesh Kashyap Mid-Caps [email protected] 91-22-43320671 Viraj Mehta [email protected] 91-22-43320634
Dhaval Dama FMCG, Mid-Caps [email protected] 91-79-61909518 Ruchi Bhadra [email protected] 91-22-43320601
Manoj Gori Consumer Durables [email protected] 91-79-61909523 Cash Dealing Room E-mail
Maulik Patel Oil and Gas [email protected] 91-79-61909519 Ashish Shah [email protected] 91-22-43320662
Pranav Mehta Building Materials [email protected] 91-79-61909514 IleshSavla [email protected] 91-22-43320666
Praful Bohra Healthcare [email protected] 91-22-43320611 Manoj Kejriwal [email protected] 91-22-43320663
Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661
Associates E-mail Sarit Sanyal [email protected] 91-22-43320666
Ankit Choudhary [email protected] 91-79-61909533 Vikram Patil [email protected] 91-22-43320677
Dhairya Dhruv [email protected] 91-79-61909528 Gaurav Mehta [email protected] 91-22-43320680
Harshit Patel [email protected] 91-79-61909522 Compliance Officer E-mail
Meet Chande [email protected] 91-79-61909513 Jay Soni [email protected] 91-79-61909561
Nishant Bagrecha [email protected] 91-79-61909526 Corporate Communications E-mail
Prateeksha Malpani [email protected] 91-79-61909532 MahdokhtBharda [email protected] 91-22-43320647
Ronak Soni [email protected] 91-79-61909525 Quant Analyst
Rushabh Shah [email protected] 91-79-61909520 Kruti Shah [email protected] 91-22-43320632
Shreepal Doshi [email protected] 91-79-61909541 F&O Dealing Room
Varun Baxi [email protected] 91-79-61909527 Kunal Dand [email protected] 91-22-43320678
Vikas Jain [email protected] 91-79-61909531 Dhananjay Tiwari [email protected] 91-22-43320668
Mukesh Jain [email protected] 91-22-43320667
Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion and ATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.
Registered Office:
Equirus Securities Private Limited
Unit No. 1201, 12th Floor, C Wing, Marathon Futurex,
N M Joshi Marg, Lower Parel,
Mumbai-400013.
Tel. No: +91 – (0)22 – 4332 0600
Fax No: +91- (0)22 – 4332 0601
Corporate Office:
3rd floor, House No. 9,
Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge,
S.G. Highway Ahmedabad-380054
Gujarat
Tel. No: +91 (0)79 - 6190 9550
Fax No: +91 (0)79 – 6190 9560
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 11 of 12
© 2018 Equirus Securities Private Limited. All rights reserved. For Private Circulation only. This report or any portion hereof may not
be reprinted, sold or redistributed without the written consent of Equirus Securities Private Limited
Analyst Certification
I, Harshit Patel/Depesh Kashyap, author to this report, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or companies and its or their
securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report.
Disclosures
Equirus Securities Private Limited (ESPL) having Corporate Identification Number U65993MH2007PTC176044 is registered in India with Securities and Exchange Board of India (SEBI) as a trading member on the
Capital Market (Reg. No. INB231301731), Futures & Options Segment (Reg. No.INF231301731) of the National Stock Exchange of India Ltd. (NSE) and on Cash Segment (Reg. No.INB011301737) of Bombay Stock
Exchange Limited (BSE).ESPL is also registered with SEBI as Research Analyst under SEBI (Research Analyst) Regulations, 2014 (Reg. No. INH000001154), as a Portfolio Manager under SEBI (Portfolio Managers
Regulations, 1993 (Reg. No.INP000005216) and as a Depository Participant of the Central Depository Services (India) Limited (Reg. No.IN-DP-324-2017). There are no disciplinary actions taken by any regulatory
authority against ESPL. ESPL is a subsidiary of Equirus Capital Pvt. Ltd. (ECPL) which is registered with SEBI as Category I Merchant Banker and provides investment banking services including but not limited to
merchant banking services, private equity, mergers & acquisitions and structured finance.
As ESPL and its associates are engaged in various financial services business, it might have: - (a) received compensation (except in connection with the preparation of this report) from the subject company for
investment banking or merchant banking or brokerage services in the past twelve months;(b) managed or co-managed public offering of securities for the subject company in the past twelve months; or (c) have
received a mandate from the subject company; or (d) might have other financial, business or other interests in entities including the subject company (ies) mentioned in this Report. ESPL & its associates, their
directors and employees may from time to time have positions or options in the company and buy or sell the securities of the company (ies) mentioned herein. ESPL and its associates collectively do not own (in
their proprietary position) 1% or more of the equity securities of the subject company mentioned in the report as the last day of the month preceding the publication of the research report. ESPL or its Analyst or
Associates did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ESPL nor
Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or
brokerage service transactions. ESPL has not been engaged in market making activity for the subject company.
The Research Analyst engaged in preparation of this Report:-
(a) has not received any compensation from the subject company in the past twelve months; (b) has not managed or co-managed public offering of securities for the subject company in the past twelve months; (c)
has not received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (d) has not received any compensation for products or
services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject
company or third party in connection with the research report; (f) might have served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject
company.
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current. Also there may be regulatory, compliance, or other reasons that may prevent ESPL and its group companies from doing so. This document is prepared for assistance only and is not intended to be and must
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anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. ESPL/its affiliates do and seek to do business with companies covered in its
research report. Thus, investors should be aware that the firm may have conflict of interest.
PVR Ltd Absolute – LONG Relative – Overweight 17% ATR in 17 months
October 25, 2018 Analysts: Harshit Patel (+91-9825406497)/Depesh Kashyap, CFA (+91-7228934327) Page 12 of 12
A graph of daily closing prices of securities is available at http://www.nseindia.com/ChartApp/install/charts/mainpage.jsp and www.bseindia.com (Choose a company from the list on the browser and select the
“three years” period in the price chart).
Disclosure of Interest statement for the subject Company Yes/No If Yes, nature of such interest
Research Analyst’ or Relatives’ financial interest No
Research Analyst’ or Relatives’ actual/beneficial ownership of 1% or more No
Research Analyst’ or Relatives’ material conflict of interest No
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Equirus Securities Private Limited (ESPL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition ESPL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by ESPL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., ESPL has entered into a chaperoning agreement with a U.S. registered broker-dealer name called Xtellus Capital Partners, Inc, (''XTELLUS'). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement. "U.S. Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US Persons" under certain rules. The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, XTELLUS, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.