PVR: Improved footfalls and regional hits expand the margin but is the road ahead as promising?

PVR Limited (PVR) is India’s largest multiplex player in India operating 854 screens across 173 properties. PVR offers a diversified cinema viewing experience through its formats, including ‘PVR Director’s Cut’, ‘PVR LUXE’, ‘PVR IMAX’, ‘PVR P[XL]’, ‘PVR Playhouse’, ‘PVR 4DX’, ‘PVR Onyx’, ‘PVR Cinemas’, and pursuant to acquisition and amalgamation of SPI Cinemas, ‘Escape’, ‘Sathyam’ and ‘Palazzo’.

The company displays a variety of content to cater to various customer segments in India. Apart from box office revenues, PVR also generates revenue from non-box office sources such as food and beverage sales, advertisement revenue, convenience fees, and income from movie production/ distribution. Due to the disruptions created by the COVID-19 pandemic, the film exhibition industry had a difficult year in FY 2020-21.

FY 2021-22 started with the onset of the 2nd wave but ended on a high with March 2022 witnessing a strong recovery in admissions. The swift recovery seen in Q3, and Q4 of FY 2021-22 validates belief on the agility and strength of the company’s business to bounce back once new content is made available for release. Despite a difficult macro climate during the past 2 years, PVR handled the challenges expertly and benefitted from proactive cost control, liquidity, and cash flow management.

Q1FY23 key highlights

PVR reported revenue of Rs.981cr (Q4FY22-Rs.537 cr) and a 11% increase compared to Q1FY20 (Pre-Covid Level). The quarter was marked by some biggest domestic blockbusters which aided the growth. Company reported the highest ever EBITDA for the quarter of Rs.362 cr (Q4FY22-Rs.142 cr) and the EBITDA margin expanded by 1,160 to 36.2% on QoQ basis. 

The company was able to maintain the fixed cost per screen (rent, common area maintenance, employee expense, electricity, and other expenses) to pre-covid levels (1QFY23-Rs.5.5 vs 1QFY23- ₹5.6)

PVR Ltd. owns and operates multiplexes across 21 States and UT’s with a total of 858 screens (including 9 in Colombo). Major income segments for them are box office, food & beverage (F&B) and advertisement (Ad).

• PVR revenue grew by 83% on a QoQ basis to Rs.981cr in Q1FY23, aided by core operations and regional block blusters.

• Footfall jumped by 75% QoQ to 2.5cr, while Average Ticket Price (ATP) and Spend Per Head (SPH) on food & beverage increased by 3.3% and 10% on a QoQ basis.

• EBITDA margin improved by 400bps to 36.2% compared to pre-covid level of 32.2% in Q1FY20.

• PVR is expected to open 125 screens during FY23, up by 14% on a YoY basis, by entering 9 new cities to reach a total footprint to 84.

Margin improvement

Improved footfalls and regional hits expand the margin During the quarter, PVR reported a total footfall of 2.5 cr (+70% QoQ) and has generated revenue of Rs.530 cr (Q4FY22-Rs.294 cr), up by 80% on a QoQ basis, from the sale of movie tickets with a marginal increase of 3.3% in the Average Ticket Price (ATP) to Rs.250 from Rs.242 during Q4FY22. Revenue from food & beverages reported at Rs.324 cr (+90% QoQ).

Spend Per Head (SPH) on food & beverages increased to Rs.134 (+10% QoQ) from Rs.122 in the preceding quarter. Advertisement income reached Rs.63 cr from Rs.22 cr during Q4FY22. Management expects that the advertisement revenue will reach pre-pandemic levels by Q3.

Current screens

The company has opened 14 screens across 3 properties during the quarter and ramping up its capex to open a total of 125 screens by the end of current fiscal. One Third of new screens are expected to open in Tier-2 & 3 cities and the company is stepping into 9 new cities during the year. The growth is estimated to fund with the internal accruals. 

A strong movie content line up is expected to drive the footfall in the coming quarters. Management believes the release of blockbusters on OTT platforms were only experimental and they do not pose a significant threat to the multiplex industry.

Company vision for future

The company guided for 125 screens opening FY23, with capex of ~400 crore, all funded through internal accruals. In Q1, 14 screens have been added and 82 screens are under fit outs. Majority of screen addition is likely in H2FY23. It also guided that ad revenues would get to pre-Covid run rate in Q3 led by festive recovery. 

For FY23 full year, ad revenues will be lower than FY20 (pre-pandemic levels). On the SPH front, the company indicated that SPH to ATP ratio (currently at 54%) will continue to inch up, going ahead. It expects the ATP to remain firm.

Company indicated Q2 will be 75-80 percent (of pre-COVID level) and by Q3 there will be full recovery in the festival season. Brands FMCG (15- 17% of ad revenues) and Telecom, which are relevant, have shown slow recovery. FMCG has not fully come back and handset manufacturers are facing supply chain issues.

PVR is expected to report robust growth on the back of increased footfall due to festivals and vacations, content pipeline and screen addition.

Content pipeline

Shuchi Nahar is a Certified Research Analyst. She can be found on Twitter at @shuchi_nahar

Note: This article is for informational purposes only. Please speak to a SEBI-registered investment advisor before making any investment relatedinvestment-related decision.