Target: ₹1,610
CMP: ₹915.70
Karnataka government has proposed an ₹200 price-cap for movie tickets. This is not the first time. Previous attempt (2017) offers two precedents. One, special format screens – where PVR-Inox’s tickets are dearer – were exempt. Two, it could face legal hurdles.
Prior court rulings – High Courts as well as Supreme Court – have struck down price regulation orders. Even if enforced, the impact will be miniscule. Assuming ATP (₹252 gross ATP) and occupancy levels (24 per cent) for the balance screens to be same as company average, the full year revenue impact of price-cap would be ₹19.20 crore or 0.28 per cent of revenues . Box office collection in Q4 (₹2,000 crore in January/February), on the other hand, is looking up. That, along with a healthy pipeline, far outweighs price-cap fears.
As we noted in Wrong Causality, recent correction was likely technical, which is behind. In fact, tailwinds are now emerging. Return of big banner movies, better pipeline of Hollywood/Bollywood movies (where PVR-Inox has higher share) along with higher disposable income (due to income tax relief) should support occupancies. Reasonable valuations – 9x EV/EBITDA (pre IND AS) – limit downside. These are strong arguments to Buy.
