PVR-Inox - Consistency Needed For Re-Rating; Hollywood Strike, Theatrical Window Key Focus: Nirmal Bang

Nirmal Bang Report

Key Points

• Q2 FY24 is turning out to the best quarter ever for the Indian multiplex industry. Even better than Q1 FY23. This has happened as Hollywood, Bollywood and Regional content have all delivered simultaneously.

• The movies that drove strong revenue were – ‘Mission Impossible - Dead Reckoning Part One’ and ‘Oppenheimer’ from Hollywood. ‘Gadar 2’ and ‘Jawan’ have been monster hits by Bollywood standards. Some medium level Hindi hits have been ‘Rocky Aur Rani Ki Prem Kahani’, ‘OMG 2’, ‘Satyaprem Ki Katha’. ‘Jailer’ featuring the South superstar Rajnikant has been a big hit as well. The slate of movies in Q3 FY23 is good but not exciting enough like that of Q2 FY24. We also see slight risk to the release of some Hollywood movies in Q3 FY24 due to the continuing strike of actors and writers in the U.S. Hence, while we have upped our occupancy estimates for Q3 FY24, they are still below Q2 FY24 numbers.

• The big positive that we have been highlighting in our notes is the disciplined capital allocation strategy adopted by the management six months back when PVR had curtailed the number of new screens it is planning to open and restrict future openings to that funded through internal accruals only. We believe that the stronger cash flows along with more conservative capex will help reduce net debt on its balance sheet.

• Enforcing the two-month theatrical window for South Indian language movies will remain an overhang as long as single screens and regional chains dominate.

• We have upped our occupancy estimates for Q2 FY24 as well as Q3 FY24 while maintaining estimates for Q4 FY24. The ~37% run-up in the stock from the May 2023 low, in our view, has already captured some of these positives.

• We maintain our 'Buy' rating as we have upgraded both our estimates as well as enterprise value/Ebitda multiple to 13 times from 12 times earlier. Further, we have rolled forward the basis of valuation by three months to September 2025. We have assigned a higher target price of Rs 2,131. Should occupancy levels improve more than what we have estimated, there is potential for further earnings/multiple upgrades.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.