After suffering a loss of 5% in the previous sessions, shares of multiplex players INOX Leisure and PVR rose about 4% each on September 12
This relieved investors as they had lost over ₹800 crore in the previous session after both stocks tanked. With the gains of September 12, the cumulative market capitalisation of both stocks is now at nearly ₹18,000 crore.
Why did the stock rise?
Analysts had attributed the fall of both stocks on September 9 to the tepid opening of a much-anticipated movie Brahmastra.
However, the box office collection of the movie saw a significant rise over the weekend which boosted the stock. As per media reports, the global box office collection for Brahmastra might have reached ₹211 crore.
"PVR and Inox both fell about 5% on Friday, September 9 as first reviews of Brahmastra were mixed and it seemed that the movie would be unable to live up to the hype of RRR, KGF and Bahubali," said Manish Agrawal, Real Estate and Multiplexes Research Analyst, JM Financial Institutional Securities.
"However, over the weekend Brahmastra has shown strong collections across domestic and international circuits and thus brought back positivity in the multiplex stocks. As the tussle between OTT and theatres continues, for now, Brahmastra has shown that good content/spectacle movies do have an audience in multiplexes. Over the long run, the Indian multiplexes industry remains a screen penetration story where PVR-Inox (if merged) will become by far the largest player."
The road ahead
This year so far, the stocks of PVR and INOX have logged healthy gains; PVR is up over 46% while INOX is up 45%.
Multiplex chains had to face a tough time after Covid-19 hit the world. They are still facing challenges as life returns to normalcy. Analysts point out that due to the pandemic, viewers are accustomed to watching content they like on their screens at home, thanks to a slew of OTT platforms as well as the low cost of data in India.
A strong movie pipeline, increased adoption of regional cinemas across languages, and normalisation of the 8-week theatrical window are expected to augur well for the multiplex players in the current financial year.
As Ketan Sonalkar, Head of Research at Univest pointed out, for multiplexes to thrive, they need to offer a far superior customer experience including quality content as it is not in sync with viewer expectations.
"The OTT experience had a huge impact which led to a shift in spending more time on home screens than multiplexes. Add to the fact that customers have also felt cheated by multiplexes for years with astronomical costs for food and beverage, which is available at less than half the price in the food court in the same mall. All these factors are leading to PVR and Inox stocks volatility," said Sonalkar.
Santosh Meena, Head of Research, Swastika Investmart highlighted that multiplex stocks have witnessed a strong performance this year due to huge demand emanating from the subsiding pandemic effects, robust movie lineup, improved box office performance, and growing advertisement and F&B (food and beverage) revenues.
"One thing to note is that the performance of multiplex companies is highly dependent on box office stats, which can be easily gauged by the public and investors. Thus, their stocks price in the information very quickly, explaining the high volatility in their stock prices. Additionally, stocks witness high volatility and profit booking when they are trading at all-time high or 52-week high prices," said Meena.
In the short term, the performance of both stocks will depend on how much movies like Brahmastra earn.
"Strong numbers for Brahmastra is a welcome sign for the industry, but key question is - will the producers of Brahmastra make money? It is important for the industry’s long-term health. We continue to remain positive on multiplexes on a long-term basis; retain ‘buy’ on our coverage stocks PVR and INOX," said brokerage firm Edelweiss.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.