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After a long wait, multiplex companies PVR Ltd and Inox Leisure Ltd reported decent earnings for the quarter ended 31 December 2021. Since the covid-19 outbreak, both companies incurred huge losses as curbs on multiplexes were among the last to be eased.

Operating metrics turned positive after several quarters in Q3. Adjusted for the Ind-AS impact, PVR’s consolidated Ebitda (earnings before interest, taxes, depreciation, and amortization) stood at 66.2 crore. With that, PVR has stopped burning cash after six quarters. Similarly, Inox Leisure saw an Ind-AS adjusted consolidated Ebitda of 54 crore in Q3.

Lagging behind
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Lagging behind

Easing of mobility restrictions and rising pace of vaccinations, boosted footfall. Besides, good movie content from Bollywood, regional and Hollywood movies, helped. Robust box office collections from big-budget movies supported the comeback of multiplex companies.

Q3 earnings conference calls indicate managements are hopeful of a faster demand revival given the content pipeline. According to PVR, while many big-ticket movies are delaying releases owing to the third covid wave, recovery is expected to be quick owing to a strong movie pipeline over the next 12 months. Inox’s management expects releases to resume to a large extent from the first week of March.

Be that as it may, despite the managements’ upbeat outlook, analysts are cautious in the near-term. “Q4 will be a difficult quarter for these companies given the volatility in the situation due to covid. While the movie pipeline (Jersey, RRR, and Radhe Shyam) is robust, it is difficult to predict whether these movies will be released in Q4 or pushed forward," said Jinesh Joshi, research analyst at Prabhudas Lilladher. “We expect recovery to pick up pace from Q1FY23, assuming that the covid scare is over by then," he added.

“We expect profitability to be about 20% lower versus pre-covid levels in FY23, due to lower footfall (small/medium budget films’ footfall may revive in H2FY23) and less ad revenues," said analysts from Elara Securities (India) Pvt. Ltd in a report. “But if the pandemic ends, we expect strong growth in FY24 as structural content trends remain strong, " they added.

As such, Q4 revenues could be hit as occupancies are expected to remain low. Hereon, investors would track how fast footfall recovers to pre-pandemic levels, which is key for earnings. “While these stocks may react positively on Monday, a meaningful upside could take time," said an analyst with a domestic brokerage house, seeking anonymity. As things stand, shares of PVR and Inox Leisure are down 23-26% from their respective pre-covid highs seen in early 2020.

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