HSBC sees multiplexes as an exponential growth opportunity, a phase that is still due in India. They reiterate buy ratings on PVR with target of Rs 1540 and Inox Leisure with target of Rs 330. With cinema halls being allowed to open from 15 October, the focus now shifts to content pipeline and footfall trends. HSBC believes that the near-term risks are priced in; announcement of COVID-19 vaccine and festive season demand key near-term catalysts.

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Cinemas to reopen after a gap of nearly 7 months:

The Government of India has allowed cinemas to operate with upto 50% occupancy from 15th October, while following strict SOPs (standard operating procedure) and has left to the states to take the final decision. This is a welcome move according to HSBC, coming just ahead of the festive season in India, traditionally a strong quarter for the cinema industry.

Key challenges in the next phase:

Staggered re-opening:
 
Around 10 states and four union territories have granted permission for cinemas to re-open so far, which account for 55-60% of total screens for PVR and INOX. However, key state Maharashtra is yet to issue a permit, which has discouraged some big budget movies from announcing release dates.

Limited fresh content:

In the initial few weeks after re-opening, multiplexes will depend on library content. Nonetheless, the release of a few English and regional movies are already announced, and HSBC expects a better line-up during Diwali and Christmas.

Getting customers back to cinemas is a key challenge:

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Multiplexes are treating the initial weeks post reopening as a confidence building phase,   showcasing the best of safety standards. In this context, early signs of plateauing in the COVID-19 curve are encouraging. In addition, PVR and INOX are giving discounted ticket prices and are using their loyalty programmes for customised offerings to encourage footfalls. These initiatives should aid the confidence building in consumers in the run-up to when fresh content becomes available.

(Authored by Rahul Kamdar)