ICICI Securities on PVR Inox: Buoyed by ‘five mega-budget Indian movies’, domestic brokerage ICICI Securities expects
PVR Inox to post its ‘strongest’ quarterly show in the October-December quarter (Q3) of the current financial year 2024-25 (FY25). Given this, the brokerage has raised PVR Inox share price target to Rs 2,250 with a ‘Buy’ rating (maintained).
“We believe stars are aligning for PVR Inox’s rerating as it is likely to benefit from a strong content line-up in Q3FY25, with highly anticipated movie releases such as ‘Pushpa 2’, ‘Bhool Bhulaiyaa 3’ and ‘Singham Again’ among others. In fact, there are five mega budget movies (regional + Hindi) set to release in the quarter. The timing aligns with major festivities like Diwali and Christmas, offering audiences ample opportunity to visit theatres,” ICICI Securities said in its report on September 13.
According to the analysts, weak content pipeline, which led to a weak performance of the movie exhibition industry over the last year, was one of the key overhangs on the stock.
However, a strong Box Office show by Hindi movies like ‘Jigraa’ (starring Alia Bhatt), ‘Bhool Bhulaiyaa 3’, ‘Singham Again’, ‘Chaava’, ‘Sitaare Zameen Par’ (starring Aamir Khan), ‘Baby John’, and ‘Deva’; English movies like ‘Joker: Folie a Deux’, ‘Venom’, ‘Gladiator 2’, ‘Mufasa: The Lion King’, ‘The Lord of The Rings’; and Regional movies like ‘Pushpa 2’, ‘Vettaiyan’, ‘Kanguva’, ‘Thandel’, and ‘Devara: Part 1′ will likely resolve investors’ concern in the coming months.
ICICI Securities’ new target price on PVR Inox reflects around 41 per cent upside from the stock’s Thursday’s closing price. Meanwhile, on the bourses, shares of PVR Inox rose 2.7 per cent to Rs 1,642.15 per share in the intraday trade today. By comparison, the BSE Sensex was down 50 points at 11:15 AM.
Box Office roars in Q2
After a muted Q1 FY25, the July-September quarter (Q2 FY25) has, so far, witnessed robust growth in collections. Till August 19, the net box office collections (NBOC) stood at Rs 1,189 crore, reaching approximately 66 per cent of Q1 levels.
“A key shift this quarter is the resurgence of Hindi films, which are driving collections, in contrast to the previous quarter where regional films took the lead. Additionally, English films have posted a solid performance, further contributing to the momentum. These trends bode well for PVR Inox,” said analysts at B&K Securities.
That said, the upcoming releases are expected to generate moderate collections, with no major tentpole movies or blockbusters anticipated until the end of Q2FY25, the brokerage cautioned.
In the April-June quarter, Cinema exhibitor PVR Inox had reported a wider consolidated net loss of Rs 179 crore as compared to a consolidated net loss of Rs 82 crore in the first quarter of the last fiscal.
Consolidated revenue from operations, too, slipped to Rs 1,190.7 crore in Q1 FY25 from Rs 1,304.9 crore in the year-ago period. Total expenses, on the contrary, climbed to Rs 1,457.5 crore as compared to Rs 1,437.7 crore in the corresponding period in the last fiscal.
PVR Inox De-leveraging initiatives
Apart from a strong content pipeline, ICICI Securities says PVR Inox is ‘actively’ exploring monetisation of non-core real estate assets. It is in advanced negotiations to monetise two of its assets for an expected inflow Rs 300 – 350 crore within 1–2 months.
That apart, PVR Inox, ICICI Securities added, is transitioning to a capital-light growth model as it aims to reduce overall capex by 25 per cent in FY25, as compared to FY24.
It is also being selective towards screen additions, prioritising expansion efforts in the underpenetrated south India market.
Notably, PVR Inox shut down 85 underperforming screens across 24 cinemas in FY24 – all of which were margin-dilutive. In FY25, the company plans to close an additional 70 non-performing screens to improve operational efficiency.
“The company is in the process of renegotiating the cinema rentals. For new properties, PVR Inox is opting for variable rental agreements. This should help in reducing the volatility of profits due to seasonal variation through the quarters,” ICICI Securities noted.
According to analysts at Emkay Global Financial Services the management is taking steps to drive higher revenue and to optimise costs, but these are likely to fructify only in the medium-term.
“The near-term movie pipeline has improved which should result in some pick-up in collections going ahead. We cut FY25 and FY26 Ebitda estimates by 9 per cent and 2 per cent, respectively, to factor in the Q1 performance,” the brokerage had said in its Q1 result review report. It maintained ‘Buy’ on the stock with a target price of Rs 1,650.
