The show goes on for multiplex companies

Inox Leisure, PVR reported an operating profit, but higher finance, depreciation costs led them to post pre-tax losses


PVR’s average ticket prices during the March quarter had increased 8.3% from a year earlier to <span class='WebRupee'>Rs.</span>182, while that of Inox rose by 5.7% to <span class='WebRupee'>Rs.</span>167. Photo: Reuters
PVR’s average ticket prices during the March quarter had increased 8.3% from a year earlier to Rs.182, while that of Inox rose by 5.7% to Rs.167. Photo: Reuters

The PVR Ltd stock closed at a 52-week high of Rs.903 a share last Wednesday.

The multiplex firm announced last week that it closed the DT Cinemas deal. Under the revised terms, PVR will now add 32 screens with the acquisition, compared with the earlier estimate of 39 screens.

Nonetheless, the deal closure is good news.

The DT Cinemas acquisition and its organic screen addition will help PVR clock 608 and 664 screens in financial year 2017 (FY17) and financial year 2018 (FY18), respectively, according to ICICI Securities Ltd.

“It is expected to report ATPs (average ticket prices) of Rs.207 and Rs.218 in FY17E and FY18E, respectively,” wrote analysts from ICICI Securities in a note on 31 May.

The report further added that major growth in ATPs would stem from DT Cinemas’ screens, which operate at a superior ATP i.e. at ~15-20% premium to that of PVR. At March end, PVR had 516 screens.

On the other hand, Inox Leisure Ltd plans to add 89 new screens for financial year 2017, leading to 509 screens by the year end.

PVR’s ATP during the past quarter had increased 8.3% from a year earlier to Rs.182, while that of Inox rose by 5.7% to Rs.167.

While both the companies fared well in the seasonally weak March quarter and posted good growth in operating profit, PVR’s performance was better.

Further, PVR’s advertising revenue growth at 19.3% looks far superior to the 2% decline in advertising revenue that Inox reported.

A delay in the absorption of advertising rate hikes has taken a toll on Inox’s advertising revenue lately.

Even as both the companies reported an operating profit, higher depreciation costs and finance expenses led them to post pre-tax losses.

Still, the year as a whole proved to be rather good, what with movies such as Baahubali-The Beginning, Bajrangi Bhaijaan, Tanu Weds Manu Returns, Avengers, Piku, etc. performing well at the box office.

The upshot: PVR’s pre-tax and exceptional item profit increased to Rs.149 crore for financial year 2016 from Rs.14.6 crore for financial year 2015, a somewhat dull year for cinema performance.

Similarly, the measure for Inox increased to Rs.89.5 crore from Rs.16.5 crore.

What about the current financial year?

Well, the year has begun well with the success of The Jungle Book and the content pipeline is looking strong.

But will this year be better than the last?

The answer to that will drive the fate of these stocks, which have outperformed the benchmark Sensex in the past year. PVR and Inox trade at about 30 times and 20 times estimated earnings for this fiscal, respectively, adequately factoring in the optimism in the sector.

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