Last week was eventful for the multiplex sector, which has seen many deals in recent years. The latest one was Carnival Films Pvt. Ltd, which acquired Big Cinemas, part of Reliance MediaWorks Ltd, making it the third largest multiplex operator in the space. Following this deal, say analysts, consolidation will continue to happen as it eventually gives companies better bargaining power and some cost synergies. Consolidation is one show that will go on.

But, will competitive intensity increase considerably for PVR Ltd, which is the leader in the sector, after the recent deal?

Well, investors can breathe easy on that one. Big Cinemas’ ATP (average ticket price) and SPH (spending per head on food and beverages) are 16% and 40% lower, respectively, than those of PVR, implying that Big Cinemas’ screen locations and quality are not as good compared with that of PVR and Inox Leisure Ltd, IDFC Securities Ltd said in a note on 16 December. “There would be no material increase in competitive intensity as we believe Carnival’s screen portfolio is sub-standard compared to that of PVR and Inox as it was built largely through acquisition of sub-standard assets (Broadway Cinemas from HDIL and now Big Cinemas)," added the IDFC report.

PVR has 454 screens spread across 102 locations, according to its September quarter presentation. In 2014-15, the company intends to add 70 new screens, out of which 24 were added in the half year ended September.

The company’s financials though have been somewhat lacklustre so far this year. Lack of good content played spoilsport for the June and September quarters, consolidated revenues during which increased by 8% and 9%, respectively, compared with the year-ago period. Higher costs meant operating profit margins fell year-on-year for both quarters.

The PVR stock has increased marginally (up 0.4%) since it announced its September quarter results at October end. In comparison the S&P BSE 500 index has increased by 2.5% during the same period. Still, its shares have outperformed this fiscal year. For the trend to continue, it goes without saying that the quality of content has to be good.

While October saw strong content performance, things have been relatively slower on that front since then. If there is no meaningful pick up in the content pipeline for the rest of the year, PVR earnings estimates for this fiscal year run the risk of a downward revision.

The writer does not have any positions in the companies mentioned here.

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