After delivering multi-bagger returns in the last 3 years, some correction has been witnessed in the multiplex stock PVR in the last 9 months.
PVR surged as much as 117 percent from its COVID low of ₹705, hit in May 2020, to currently trade around ₹1529.60 (as on April 17, 2023).
The stock has lost 19 percent in the last 1 year while, in the last 9 months, since August 2022, the scrip had shed over 28 percent.
The stock has been flat but in the green in April 2023 so far. It was flat in March as well but shed 10.5 percent in February and 1.3 percent in January. Overall, in 2023 YTD, the stock is down around 10 percent.
After this recent correction, domestic brokerage house Nuvama has retained its ‘buy’ call on the stock, in its latest report, with a target price of ₹2,125, indicating an upside of almost 40 percent.
"PVR-INOX has borrowed a leaf from FMCG companies of driving consumption via sampling. It has launched a unique 30-minute trailer screening show priced at just Re 1. We reckon this would have hardly any incremental costs and no adverse impact during peak demand. In our view, the innovation is interesting and would help address low footfalls, particularly witnessed in the case of Hindi movies. We expect this innovation to have a positive impact on footfalls. The initial response to this strategy has been encouraging," stated the brokerage.
Trailer screening show on the big screen at Re 1
The brokerage informed that PVR- INOX is packaging a first-of-its-kind content offering priced at just Re 1. It would showcase more than ten trailers of the latest movies in a 30-minute slot on the big screen.
This will serve a twin purpose: i) Increase footfalls and advance booking from a captive consumer base as most of the advance bookings happen when the consumers like the trailer. ii) Get consumers to watch most of the trailers on the big screen rather than on small screens of their mobile phones thus offering the new content option, post which consumers can be in a better position to judge which content to watch. This can be timed such that the impact on monetisation of content is limited, explained the brokerage.
It further highlighted that the initial response of this strategy has been encouraging as more than 35,000 patrons watched the trailer screening show across the company’s network of cinemas over the last weekend, adding that the show will be screened across major cinemas at prime time slots twice a day, barring three states (AP, Telangana, and TN) with controlled pricing.
PVR is a multiplex chain operator. It is engaged in the exhibition, distribution, and production of movies. The company is also involved in in-house advertisement activities; the sale of food and beverages; and gaming and restaurant businesses. It operates in India and Sri Lanka. PVR Limited was incorporated in 1995 and is based in Gurugram, India. The firm has added about 20 screens across 3 properties during the quarter. PVR operates 181 cinemas with 903 screens across 78 cities, as of December 2022.
Earnings
PVR turned profitable in the December quarter with a net profit of ₹16 crore. It had posted a loss of ₹10 crore in the year-ago period and a loss of ₹71 crore in the September quarter. It is also important to note that the multiplex chain had posted losses in the last 10 of 11 quarters on account of lower footfalls due to COVID.
Meanwhile, its revenue from operations rose 53 percent to ₹940 crore versus ₹614 crore in the year-ago period, mainly on the back of an increase in advertisement revenues and occupancy levels.
Post the earnings, the company said that the quarter witnessed a sharp bounceback on the back of strong content performance. The third quarter saw Hollywood’s resurgence with the highest-grossing movie of the quarter ‘Avatar 2’ and was supported by movies like ‘Black Panther’ and ‘Black Adam’.
Meanwhile, the dominance of regional cinema continued in the third quarter with movies like ‘Ponniyin Selvan 1’, it added.
"2023 appears to be a promising year for the film industry with a significant increase in the number of Hollywood film titles as compared to 2022 and an increase in big tent pole releases," it said in a release.
Outlook and valuation
The brokerage is positive on the long-term potential of the stock. It believes one of the most potent marketing tools for a film is trailers and this strategic content innovation by the company shall aid footfall growth. The benefit of this move shall be not only big-budget movies but also mid-rung and small-rung flicks, it said.
According to a report by Razorpay, multiplex footfalls are still hovering at pre-COVID-19 levels. However, on a positive note, spending rose by 173 percent YoY in FY23 on a soft base, informed the brokerage. On balance, given innovations such as this, improving the line-up of Hindi movies and a strong pipeline across languages in FY24E, the brokerage has reiterated its positive stance on multiplexes over the medium/long term.
In an earlier report, dated March 2023, the brokerage noted that the PVR-Inox merger will drive annual EBITDA margin synergies of ₹200–250 crore over 12–24 months. The brokerage firm has increased its pre-IND AS (pre-India accounting standard) EBITDA estimates for the merged entity by 7 percent and 7.5 percent for FY24 and FY25, respectively.
Other brokerages are also bullish on the stock. Brokerage firm Prabhudas Lilladher also has a 'buy' call on the stock with a target price of ₹2,096, implying a 35 percent upside.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
