PVR Inox Q2 Results Review - Strong Occupancy Drives Profitability: Motilal Oswal

Motilal Oswal Report

PVR Inox Ltd.’s occupancy surged in Q2 FY24 as the quarter witnessed strong footfalls of 48.4 million on the back of several big-ticket movie releases across genres and languages. The release pipeline remains strong.

Key things to watch out for: Sustained occupancy, a recovery in advertising revenue, increased risk of rising scale and the traction of movie releases over OTT platforms, as highlighted earlier by us.

The merged entity, with a revenue scale of ~Rs 80 billion as on FY25E and expected Ebitda margins of 18.5%, is currently trading at a significant discount of ~30% versus pre-Covid at enterprise value/Ebitda and price/earnings valuation of 12 times/27.6 times on FY25E basis.

We expect business momentum to remain intact in Q3 FY24 on the back of a healthy release pipeline. We value PVR-Inox at 12 times FY25E EV/Ebitda to arrive at a target price of Rs 1,700. We reiterate our 'Neutral' rating on the stock.

Financial performance

• Consolidated revenue grew 89% YoY/53% QoQ to Rs 20 billion (5% beat), driven by healthy overall growth across segments.

• Ticketing revenue jumped approx. two time YoY to Rs 11.2 billion, aided by 25% YoY/12% QoQ growth in average ticket price to Rs 276 and ~11.3% growth in occupancy to 32.3% as the quarter witnessed strong responses to releases.

• Food and beverage revenue grew 89% YoY to Rs 6.4 billion, driven by 15% spends per head growth and improved footfalls.

• Ebitda (pre Indian accounting standard 116) stood at Rs 4.3 billion and margins came in at 21.4% (estimate: 19.6%), driven by healthy revenue growth. Sequentially, Ebitda margins improved by ~15%.

• Depreciation/interest income grew 35%/17% YoY to Rs 1.2 billion/Rs 486 million, while other income declined 9% YoY to Rs 197 million.  Resultantly, the company reported profit after tax of Rs 2.1 billion versus a loss of Rs 784 million in Q2 FY23 (35% beat).

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