BackPVR faces risk from poor performance of Bollywood movies
The rich valuation PVR commanded historically may contract, given the slower than earlier growth and risk posed by OTT players, analysts said
PremiumMultiplex chain PVR Ltd reported a solid show in the June quarter (Q1FY23) with its profit after tax (PAT) and Ebitda turning positive. Ebitda is earning before interest tax depreciation and amortization.
After adjusting for the impact of the new accounting system IND-AS 116 -Leases, consolidated Ebitda, and PAT stood at ₹208 crore and ₹68 crore respectively, in Q1FY23 as compared to a loss of ₹110 crore and ₹142 crore for Q1FY22.
Revival in footfalls and a robust movie pipeline drove the company's average ticket price of ₹250 and spending per head on food and beverages of ₹134 to a record high in Q1FY23. The company's management expects full footfall recovery to take another six months.
Its stellar earnings performance was also aided by spillover benefits of movies such as KGF 2 and RRR, among others. The company opened 14 new screens in the June quarter and aims to add 125 by FY23-end. This captial expenditure will be funded internally, the management said.
Shares of the company rose 2.5% on the National Stock Exchange in Friday's early trade.
On the flipside, its high-margin ad revenues remained subdued at 68% of pre-covid levels. According to the management, large advertisers in sectors such as FMCG and other MNCs are yet to ramp up their ad spends, so it expects ad revenues to fully recover by Q4FY23.
Analysts at Motilal Oswal Financial Services Ltd expect the company's business to normalize by FY23, with Ebitda touching 14% over FY20 levels. "The rich valuation it commanded historically may contract, given the slower than earlier growth and risk posed by OTT players," added the domestic brokerage house.
The poor performance of Bollywood movies is also seen as a potential dampener for the company's collections trajectory. "With Bollywood still failing to live up to its past glory, it was regional and Hollywood movies that helped the industry deliver record box-office collections. However, we believe that Bollywood content success is necessary to sustain and surpass these collections as the performance of regional movies has been sporadic," said analysts at Emkay Global Financial Services Ltd.
Apart from its earnings, another important development that investors are monitoring is its merger with Inox Leisure Ltd. The company's management told analysts that the merger is on track and has received approval from the stock exchanges and market regulator. Further, it would be applying for an National Company Law Tribunal nod in two-three weeks, which should be processed by 4QFY23.
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