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Nirmal Bang Report
PVR Inox Ltd. reported its best our ever quarter in its history, as content across languages connected with consumers. It also saw the revival of Hindi content delivering two of the biggest blockbusters in cinematic history in the form of ‘Jawan' and ‘Gadar 2'. Even some of the mid-budget Hindi movies did well, reminiscent of pre-pandemic days.
21.4% Ebitda margin (pre-Ind AS 116) is reflective of the high occupancy level (in the merged entity), high average ticket price and the merger synergies that have been extracted. But this is happening as advertising (its highest margin business) is ~30% lower than pre-pandemic times. This indicates potential for Ebitda margin to reach levels of 22-24% in very good quarters.
While the response to content across languages has been heartening, we believe the numbers of Q2 FY24 are unlikely to be surpassed in the upcoming two-three quarters at least. While Q3 FY24, a festive quarter, should be decent, we believe it will be impacted by World Cup and modest response to content in October-November. December 2023 is critical for a good Q3 FY24 as some big movies release.
While the Hollywood writers strike has come to an end, the actors' strike continues and going by media statements, we think an agreement looks unlikely anytime soon. This could mean weak Hollywood content in H1 2024. Hollywood's contribution to the Indian multiplex box office revenue is 15-20%. Not sure whether domestic content will be able to replace it.
Post Q2 FY24, we have moderated our estimates for FY24 and FY25 due to the Hollywood strike on lower occupancy and we think we could be in for some soft two-three quarters. Longer term, we continue to remain bullish on PVR Inox with a ‘Buy' and with a slightly lower target price of Rs 2090, based on enterprise value/Ebitda multiple of 13 times September 25E Ebitda (multiple unchanged).
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