Upcoming movies like ‘F-10’, ‘Adipurush’, ‘MI-Dead Reckoning’, etc., kept brokerages bullish on multiplex chain PVR INOX even after it reported a consolidated net loss of ₹333.35 crore for the quarter ended March 2023. However, this is not comparable with Q4FY22 results since the PVR-INOX merger was completed on January 1 this year.
But to get an idea, PVR posted a net loss of ₹105.49 crore in the corresponding quarter last fiscal and a profit of ₹16.1 crore in the December quarter. Meanwhile, its revenue from operations came in at ₹1,143.17 crore for the quarter under review. PVR had posted a revenue of ₹536.17 crore in the year-ago period.
Also, EBITDA for the March quarter stood at ₹285 crore for PVR INOX.
The company also informed that about 30.5 million movie buffs visited PVR INOX cinemas during the quarter under review, with an average ticket price of ₹239 and average F&B (food and beverage) spending of ₹119.
"Over the course of FY23, our company has witnessed a robust recovery despite the underperformance and volatility of Hindi movies and significantly low releases from Hollywood in the previous year. The exhibition business has witnessed strong growth, driven by the exceptional performance of regional cinema, an increase in ticket prices, and a substantial increase in consumption/spending of F&B by our patrons. While there has been some volatility at the box office over the past few months, we are confident that this trend will settle down over the next two to three quarters," the company said in a filing.
Meanwhile, Ajay Bijli, Managing Director, PVR INOX, said that the recently culminated merger of PVR with INOX will act as a key milestone for the company and the Indian film industry as a whole. “The integration process is proceeding smoothly and we are confident of achieving operational synergies of ₹225 crore over the next 12-24 months,” he said.
Stock price trend
The stock has lost 23 percent in the last 1 year and is down 20 percent in 2023 YTD. It has given negative returns in 4 of the 5 months of the current calendar year so far. It is down 5.6 percent in May so far after a 4.6 percent decline in April. Meanwhile, it rose 1 percent in March, the only month in 2023 when it was in the green. Before that, it fell 10.5 percent in February and 1.3 percent in January 2023.
The stock hit its 52-week high of ₹2,211.55 on August 8, 2022, and a 52-week low of ₹1,336.50 on May 17, 2023 (post its March quarter results).
Brokerage views
Brokerages remained bullish on the long-term outlook for the stock as it expects Hindi movie performance to improve and more Hollywood films to be released in India.
Prabhudas Lilladher: The brokerage retained its ‘buy’ call on the stock but cut its target price of ₹1,879, indicating an upside of 37 percent.
The brokerage noted that while PVR’s operational performance was broadly in-line with its estimates, the bottom line was marred by a tax write-down of ₹1,34.3 crore and an exceptional cost of ₹26.9 crore pertaining to merger expenses and accelerated depreciation charge on 50 cinemas proposed to be shut down over next 6 months. However, it also highlighted that the company's top line increased 113 percent YoY to ₹1143.2 crore (PLe ₹1182.4 crore) due to the consolidation impact with Inox Leisure. In 4QFY23, movies like ‘Pathaan’, ‘Tu Jhoothi Main Makkaar’, ‘Varisu’, ‘Thunivu’, and ‘Waltair Veerayya’ clocked upwards of ₹100 crore, aiding box office collections.
The brokerage further added that though dull screen opening guidance and Bollywood underperformance do not inspire much confidence, the content slate for the near term is healthy with movies like ‘F-10’, ‘Adipurush’, ‘Maidaan’, ‘Oppenheimer’, ‘Animal’, and ‘MI-Dead Reckoning’.
It expects PVR Inox to report 16.6 crore and 18 crore footfalls with an EBITDA margin of 17.5 percent and 19.2 percent in FY24E and FY25E, respectively.
But, it has cut FY24E and FY25E EBITDA estimates by 11.5 percent and 10 percent amid 1) dull screen opening guidance of 150-175 in FY24E v/s earlier band of 180-200 2) slow recovery in ad-revenues and 3) persistent high volatility in Bollywood genre.
IDBI Capital: The brokerage also has a ‘buy’ call on the stock but reduced its target price to ₹1,740 from ₹2,010 earlier, indicating an upside of 21 percent.
"PVR’s revenue and profit were subdued during the quarter due to Hindi content underperforming. Further, the company is shutting down 50 screens and has lowered its screen addition from 200 to 150-175 for FY24E and FY25E. We believe in near term there is still uncertainty on content and hence we are now keeping occupancy levels at 25 percent (below pre-covid average of 35 percent). We believe that certain amount of occupancy loss can be managed by improving pricing and cost rationalization. Hence, we expect margins to reach pre covid levels of 18 percent in FY25E. Further, considering synergy benefits due to merger with Inox and expectation of improving content, we maintain our BUY rating on the stock despite lowering our target price from ₹2,010 to ₹1,740 (14x on FY25E EBITDA)," it said.
