PVR INOX Ltd. share price target

PVRINOX reported better than expected performance with pre-IND AS EBITDA loss of Rs110mn (PLe loss of Rs366mn) led by better cost control (on same-store basis fixed cost was up 0.4% YoY to Rs7,639mn). Given the ongoing challenges surrounding footfall growth, PVRINOX is now in a reset mode where the focus is to 1) rationalize cost, 2) reduce debt and 3) migrate towards an asset light model with an aim to conserve cash. Progress on cost rationalization exercise is noteworthy as fixed cost per screen has remained flat at ~Rs20mn over the...

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.

Despite the release of the all-time blockbuster, Pushpa 2, PVRINOX (PVR)’s footfall remained stable QoQ at 25.7%, due to weaker performance from the Hindi language movies.

Nurturing Growth with a Shield of Margin Safety

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.

PVRINOX’s revenue stood at Rs. 1,622, up~36% q-o-q/down 19% y-o-y, beating our estimate of Rs. 1,581 crore.

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.

PVR Inox reported revenue at Rs.1191 crore, down 5.2 q-o-q/ 8.8% y-o-y in line with our estimates of Rs.1194 crore. Company reported a weak quarter due to the lack of blockbuster movies and impacted by cricketing events and general elections, which led to postponement of releases.

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.