If it wasn’t for the blockbuster performance of Baahubali 2: The Conclusion, the financial performance of PVR Ltd and Inox Leisure Ltd for the June quarter would have been more discouraging. To be sure, these companies did reap the benefits from Baahubali 2’s stellar show, in line with expectations. However, other content performance remained rather tepid, spoiling overall performance.

“We were hoping that the quarter will close extremely well with Tubelight, but that didn’t do well," said the PVR management in a post-results conference call.

Consolidated revenue for the June quarter rose 13% and 15% for PVR and Inox Leisure, respectively, compared to the year-ago quarter. Both gained from a 10% increase in average ticket prices. Strong advertising revenue growth (with Inox Leisure performing much better on this parameter) also helped overall performance. The problem, however, is that footfalls for comparable properties fell year-on-year for both firms with that of Inox Leisure falling at a lower rate.

Between the two, Inox Leisure’s operating profit margin gain of 115 basis points is encouraging, compared to the 135 basis points decline in this yardstick for PVR. A basis point is 0.01%

Inox Leisure’s operating margin was helped by marginally faster revenue growth compared to PVR. Also, its employee costs increased at a relatively much slower pace than PVR. Inox Leisure’s depreciation costs also rose slowly compared to PVR. The upshot: Inox Leisure’s operating profit increased 22%, while that of PVR rose 5%.

On Wednesday, a day when the broader markets ended higher, the PVR stock declined 2.2% and Inox Leisure lost 0.8%. While both shares have fallen so far this fiscal year, PVR and Inox Leisure have gained 17% and 14.5%, respectively, in the calendar year till now.

However, valuations are not cheap. PVR and Inox Leisure trade at 38 times and 32 times this year’s estimated earnings, respectively.

Further appreciation will come from strong content performance. Analysts aren’t too gung-ho about the movie pipeline. This quarter has movies such as Spiderman Homecoming, The War of the Planet of the Apes, Dunkirk, Mubarakan, Jab Harry Met Sejal, Simran and a few others. None of these are expected to be blockbusters.

Apart from content performance, the impact of the goods and services tax and the number of new screen additions also needs to be tracked closely.