Robust box office collections for Jawan, Gadar 2, Jailer, others to drive PVR Inox growth in Q2, says Kotak Equities

PVR Inox share price has come into limelight after the back-to-back movie hits that drove robust box office collections in India during the ongoing quarter. PVR Inox shares made a remarkable recovery and gained over 22% in the last three months.

Robust box office collections in September 2023 quarter symbolize the first true comeback of multiplexes post the pandemic, with two ₹500 crore+ hits - Gadar 2 and Jawan - one ₹300 crore+ movie - Jailer - and five ₹100 crore+ movies. There were several other regional hits in sub- ₹100 crore bucket as well. 

Moreover, the pipeline of Hindi and regional movies over the next 3-6 months appears healthy, with potential hits such as The Vaccine War (September 28), Tiger 3 (November 10), Animal (December 1), Dunki (December 22) and Fighter (January 25) in Hindi and Salaar and Leo (October 19) in regional.

Also Read: Jawan Box Office collection Day 21: Shah Rukh Khan’s movie keeps minting money

In August, PVR Inox reported footfalls of 1.9 crore with Gross Box Office Collections (GBOC) of around ₹532 crore. This was the highest ever monthly footfall and GBOC figure for the cinema chain.

Analysts at Kotak Institutional Equities believe a broad-based comeback of Bollywood Net Box Office Collections (NBOC) in the current quarter suggests normalization of consumer behavior and recovery of multiplexes post Covid. 

Kotak Institutional Equities now expects PVR Inox to report occupancy of 31% versus 25.5% earlier and footfalls of 4.74 crore versus 3.9 crore earlier.

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It expects ATP (average ticket price) of ₹258 and SPH (spend per head) of ₹133 as compared to ₹246 and ₹130 in Q1. Ad revenues are estimated at ₹130 crore versus ₹120 crore earlier. 

Pre-Ind AS 116 EBITDA and margin of ₹390 crore and 21% versus ₹220 crore and 14.3% earlier. The brokerage expects net profit of ₹300 crore for the quarter.

Moreover, PVR Inox is assessing its entire portfolio from a rental renegotiation standpoint; management has identified properties where rent-to-revenue ratio is 20%+ (about 40% of PVR INOX properties fall in this category, most are North/West India), the brokerage house noted.

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The company’s management’s intent is to make rental cost as variable as possible, so as to reduce margin volatility in weak quarters.

“We believe that the recent trends partially ease concerns around structural risks and calls for some re-rating,” Kotak Institutional Equities said.

The brokerage raised FY24, FY25 and FY26 EBITDA estimates by 24%, 10% and 5% as it increased occupancy by 150 bps, 100 bps and 100 bps, respectively. 

The brokerage has an Add rating on the stock and raised target price to ₹1,850 per share from ₹1,600 earlier. The target price implies an upside of nearly 10% from Tuesday’s closing price.

At 2:00 pm, PVR Inox share price was trading 1.45% higher at ₹1,712.20 apiece on the BSE.

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