Markets
PVR Inox needs the good picture to sustain beyond Sept quarter
Summary
PVR Inox can bank on the good pipeline of Bollywood and regional movies. However, a key risk to footfalls in the December quarter is the 2023 ICC Men’s Cricket World Cup matches, which start 5 October.For PVR Inox Ltd, a near-term risk has abated with the Writers Guild of America calling off their strike that began in May. A prolonged strike may have weighed on the release of Hollywood movies. Remember Hollywood contributed 24% to PVR Inox’s gross box office collection in the June quarter. Note that the Screen Actors Guild - American Federation of Television and Radio Artists strike is still on.
In any case, PVR Inox can bank on the good pipeline of Bollywood and regional movies. In the next two quarters, the movie pipeline includes The Vaccine War, Tiger 3, Animal, Dunki and Leo. However, a key risk to footfalls in the December quarter is the 2023 ICC Men’s Cricket World Cup matches, which start 5 October. To curtail the potential adverse impact to some extent, PVR Inox plans to specifically screen the matches played by India.
The September quarter results are expected to be solid with movies such as Jawan, Gadar 2, Jailer, Rocky aur Rani kii Prem Kahani and Oppenheimer performing well. Thus, occupancy levels are likely to be higher than 22.3% seen in the June quarter.
For FY24, Kotak Institutional Equities expect PVR Inox’s occupancy to settle at 28%, a tad higher than the earlier estimate of 26.5%. Notably, this is still below the pre-pandemic levels of 31-32%. “We believe that the recent trends partially ease concerns around structural risks and calls for some re-rating. We raise FY2024-26 Ebitda estimates by 5-24%," said Kotak’s analysts in a report on 25 September. Ebitda is earnings before interest, tax, depreciation and amortization.
But consistency is key. Earnings visibility would improve on continued momentum in content performance and in turn, aid the sentiments for the stock. “While big budget movies are delivering, smaller ones are not firing enough. For now, the PVR Inox stock seems to be factoring these positives, but near-term catalysts are missing as it may struggle to keep its occupancy rates near pre-covid levels, post a strong September quarter performance," said Karan Taurani, an analyst at Elara Securities (India). Moreover, ticket prices have gone up and that would weigh on footfalls, he added.
Thus, it may be a bit early to extrapolate that the good run of movies seen in the September quarter would sustain. Having said that, the woes around competition from over-the-top platforms appears to have lessened. PVR Inox’s shares have risen by 28% from their 52-week lows of ₹1,336.40 apiece in May, but they have been flattish in the past one year.
