PVR Inox Upgraded To 'Buy' By Kotak Institutional After Significant Decline—Here's Why

Kotak Institutional Equities upgraded PVR Inox Ltd. to 'Buy' as the brokerage believes that the stock correction is overdone. The brokerage has a target price of Rs 1,200 apiece, which implies a 25.91% upside from Wednesday's closing price.

PVR Inox has declined significantly in the past few months due to continued weakness in box office collection due to structural issues plaguing Bollywood movie releases, the brokerage said. India's gross box office collection declined 3.2% in calendar year 2024 to Rs 11,830 crore.

Recovery in Bollywood and Hollywood Gross Box Office Collection is important for PVR Inox as it contributes the most to its overall GBOC collection. Kotak Institutional Equities cut Ebitda estimates of PVR Inox by 3%–13% for financial year 2026 and 2027. It has also reduced its footfall assumptions by 1%–3% due to expected delay in Bollywood recovery.

Kotak Institutional Equities anticipates some improvement in movie releases. While Bollywood was facing structural headwinds, actors and writers' strike impacted Hollywood in terms of movie releases.

Tight control on most costs has driven a fall in PVR Inox's break-even occupancy to 20–21% now from 24% earlier. PVR Inox has implemented stringent cost measures to keep fixed costs per screen in check, the brokerage said.

PVR Inox will open 100 capital-light screens in next two-to-three years, which will help the company in maintaining annual capex in the range of Rs 400–500 crore for next few years, Kotak Institutional said.