Buy

Q2FY26 Performance: Reported revenue came in at 1823 crore, (up 12.4% YoY) with box office revenue of 983 crore (up 17.4% YoY). The footfalls were up ~15% YoY at 44.5 million and (Average Ticket Prices) ATP at 262 was up 1.9% YoY. Ad revenues were up ~15% YoY at 126 crore. F&B revenues were up 12.4% YoY at ...

In Q1FY26, PVR Inox’s revenue grew 23.4% YoY/ 17.5% QoQ, driven by successful Bollywood and Hollywood releases as well as initiatives like Blockbuster Tuesday and F&B combo offers.

PVR Inox’s ad revenue grew ~36% QoQ to ~INR 1.48bn (highest quarterly ad-income post Covid) in Q3FY25, which in our view is an encouraging development.

Nurturing Growth with a Shield of Margin Safety

Saragama's strong headline numbers masked the weakness in music licensing revenue. Consolidated revenue grew 40.3% YoY, aided by strong growth in the video segment.

PVR Inox’s occupancy reverted to ~26% in Q2FY25 despite a very weak content pipeline. Management has guided for significant improvement in Q3FY25.

PVR Inox’s Q2 results reflect better box office performance after a disappointing Q1. Footfalls, ATP, and SPH all improved in Q2 and were slightly higher than our estimates.

Post Covid, PVR Inox’s stock performance has been tracking box office collections/upcoming pipeline. After a dull H1CY24, box office collections have picked up and are expected to further improve in Q3FY25.

After a muted Q1, PVR Inox is set for sequential improvement from Q2FY25. Plus, advertising income, which has been lagging pre-Covid levels should get a boost.

We have believed that a weak content pipeline is to be blamed for the weak performance of the movie exhibition industry over the last year and not a structural shift in consumer behaviour towards OTTs, etc.

We attended Saregama’s analyst meet (as part of RPSG investor day) where the management reiterated its revenue guidance (excluding Carvaan) of 25-26% over the next 3 years.

We expect H2CY24 to be meaningfully better for movie exhibition business compared to H1CY24. We note many producers delayed the scheduled releases, which has now led to a pent-up content pipeline.

PVR Inox’s results reflect the subpar box-office collections during the quarter due to a weak slate of movie-lineup, given the general elections happening over an extended period, and the IPL and T20 World Cup held during Q1.

We believe CY24 could be a tale of two halves for theatrical content market in India. Q1FY25 was disrupted by Lok Sabha elections and the busiest sporting season.

PVR Inox’s weak stock performance reflects the lack of major movie releases
over the last couple of quarters. After a subpar Q4FY24, Q1FY25 is also turning
out to be a damp squib, with the IPL, the T20 World Cup, and the general
elections being hurdles for movie releases.