PVR Inox Box Office Slump Doesn't Deter CLSA's 'Buy' Rating
Content pull of new movies, including Bollywood films, should drive a continued occupancy recovery for PVR Inox, CLSA says.
PVR Inox Ltd.'s ticket pricing and margins may be hurt by the industry's lacklustre year-to-date performance, but CLSA sees no structural concerns in the long run as it believes multiplexes are the most popular outdoor entertainment. The brokerage has retained a 'buy' rating on the stock with a target price of Rs 1,384 apiece, implying a downside of 1.89%.
The average collections for Bollywood and Hollywood films have fallen 50% year-to-date, according to Bollywood Hungama, even as 68 more movies were released since January 2024 as against 2023, the brokerage said.
However, this slump has come after India’s gross box office collections in 2023 surpassed the pre-Covid peak of 2019 by double digits, allaying fears that multiplexes in India face structural risks, including from over-the-top streaming services.
In its investment thesis for the stock, the brokerage highlighted that concerns around the performance of Hindi film content are receding with the success of Bollywood films. "Content pull of new movies, including Bollywood films, should drive a continued occupancy recovery for PVR Inox," it said. "Further, the strong performance of English/regional films reconfirms multiplexes in India do not face structural risk."
The brokerage has also retained admission estimates of 187–210 million for the current and next fiscals, with an average ticket price of Rs 250–257 apiece.
Another factor that might contribute to occupancy levels in the mid-long term is young population of the country. It noted that 75% of PVR Inox patrons are less than 45 years of age.
New screens are also expected to aid occupancy. The company's occupancy is expanding, with a total of 1,708 screens. The company added 97 new screens in in first nine months of fiscal 2024 and exited 62 underperforming screens, the brokerage said.
The plans to increase screens in South India should boost occupancy levels, according to CLSA. The company said on Thursday said it has opened a 14 screen megaplex at Phoenix Mall of Asia in the city of Bengaluru.
"The new cinema will augment PVR Inox foothold in Bengaluru with 172 screens in 26 cinemas and in the state of Karnataka with 219 screens in 37 cinemas," the company said in the filing. "The company consolidates its presence in South India to a total of 572 screens in 100 properties."
On Wednesday, the company, after opening a nine-screen multiplex, augmented its presence in Kochi with 22 screens across three properties, consolidated its foothold in Kerala with 42 screens across six properties, and in South with 558 screens across 99 properties.
The brokerage noted that some of the downside risks include a slowdown in new mall additions, a lack of quality content, which could hinder footfall and profitability, and slower-than-expected growth in ad revenue that could hinder earnings.
However, CLSA is still positive for the stock because PVR Inox is the sector leader in a consolidating market and is funding expansions with internal accruals.
Shares of the company gained 1.30% to hit a two-month high on Friday. At 9:36 a.m., the stock pared gains to trade 0.14% higher at Rs 1,412 apiece, compared to a 0.2% decline in the Nifty 50.
Of 25 analysts tracking the stock, 21 maintain a 'buy', two recommend a hold, and two suggest a 'sell', according to Bloomberg. The average 12-month consensus price target implies a upside of 29.8%.
