Sharekhan retains its ‘buy’ rating on PVR INOX, citing robust box office collections and future releases.
Domestic brokerage company Sharekhan has retained its ‘buy’ rating on PVR INOX, the country’s largest multiplex network operator, with an unchanged price target of 2,200 apiece in its latest research note, citing solid box office (BO) collections led by a strong content pipeline across languages. This target represents a 27.38% increase in the stock’s value from its current trading price of $1,727.
‘Tiger 3’ in Hindi and ‘Leo’ in Tamil dominated box office receipts in October and November 2023, despite the World Cup Cricket. Notably, the trend carried over into December, with exceptional performances from ‘Animal’ and ‘Sam Bahadur’ amassing net BO receipts of 518 crore and 78 crore, respectively, according to the brokerage.
With the impending releases of ‘Dunki’ (Hindi), ‘Salaar’ (Telugu), ‘Aquaman and the Lost Kingdom’ (Hollywood), ‘Neru’ (Malayalam), and ‘Kabuliwala’ (Bengali), it expects BO collections to climb more in the current quarter.
According to Mint, “BO is expected to see strong collections as a result of the continued release of a strong content pipeline in Q4 FY24.” “Fighter, Kalki 2898 AD, and Untitled in Hindi are expected to drive footfalls to cinemas and multiplexes, while The Book of Clearance, Kungfu Panda 4, Snow White in English, and Captain Miller in regional languages are expected to drive footfalls,” stated the brokerage.
Furthermore, Sharekhan anticipates a rebound in advertising revenue, which had slowed in the preceding quarters up to Q2FY24. This increase is likely to coincide with the continuation of box office triumphs and the release of appealing films.
The continuing merger is expected to contribute to consistent improvements in operating indicators and solid cash flow production, hence facilitating debt reduction. According to Sharekhan, PVR and INOX realized merger synergies worth 1,200-1,400 crore in H1FY24.
In terms of new screen acquisitions, the brokerage stated that the company intends to include 160 additional screens in FY24. The company successfully added 31 and 37 screens in Q1 FY24 and Q2 FY24, respectively.
There have been an additional 22 screens added during the current quarter. In order to boost its position in Tamil Nadu, the firm introduced three-screen multiplexes in Cuddalore as part of its aim to expand its presence in southern India. According to the agency, this takes the total number of screens in the state to 139 across 23 locations.
Overall, the company continues to expand throughout southern India, with a total of 549 screens in 98 locations. The firm maintains the largest multiplex network in India and Sri Lanka, with 1,709 screens spread across 358 locations in 113 cities.
While the brokerage maintained its optimistic stance on the company, it also underlined some of the biggest downside risks, such as increasing competition from OTT companies and the worsening of content quality, which might harm footfalls and advertisement revenue growth. Inability to implement adequate price increases at the appropriate time would have an impact on food and beverage (F&B) profits due to growing input costs and an increase in COVID-19 infections.
