Adipurush hits screens: Can Lord Rama help PVR-Inox put up a good show in Q1FY24?

Adipurush releases today: The much-talked-about film, Adipurush, has hit the screens. The film, which is based on the Hindu epic Ramayana, is on everyone's radar, be it movie buffs, film critics and reviewers, trade analysts, distributors, producers, directors as well as multiplex operators and equity investors. The film, which stars Prabhas, Kriti Sanon, and Saif Ali Khan in crucial roles has already made headlines given huge promotions, as well as record advance booking for its tickets. As per news reports, more than 4.7 lakh tickets have already been sold for its weekend shows. 

Taran Adarsh, a movie critic and business analyst, said in his tweet, "#Adipurush revenue from non-national chains as well as mass venues [multiplexes as well as single screens] will be massive... " Also, South India will be HUMONGUS."

Jinesh Joshi, a research analyst with Prabhudas Lilladher, notes that the film performance will be critical for PVR-Inox’s fortunes in 1QFY24E. So far, four movies have crossed the net box office collection (NBOC) barrier of Rs 1 billion in 1QFY24E and if Adipurush is able to net upwards of Rs 5 billion, "we believe PVR-Inox will report a better performance than 4QFY23 (managed pre-IND AS EBITDA breakeven)," the analyst said in a report released on June 15. 

The report adds that even if Adipurush clocks Rs 5 billion, the NBOC of top-grossers would be lower than the previous quarter. However, the brokerage still believes that 1QFY24E can be better than 4QFY23 due to the following reasons -

• Bhola was released on March 30 and netted Rs 800 million. Hence, the spillover happened in 1QFY24E.
• A few movies such as Zara Hatke Zara Bachke (Rs 610 million), Guardians of the Galaxy (Rs 494 million), Virupaksha (Rs 640 million), and Transformers-Rise of the Beast (Rs 312 million) have done well aiding collections for the quarter.
• Flash is set to release on June 16 and will further boost NBOC.
• 4QFY23 had 3 regional movies from the South. However, NBOC's share of multiplexes for Southern movies is typically lower as that market is dominated by single screens.

Hence, considering these factors the brokerage believes that PVR-INOX will post a better performance for the ongoing quarter (April-June period). It has retained a 'BUY' rating on the stock with a target price of Rs 1,879.

PVR-Inox merger 

In March 2022, PVR and INOX Leisure announced the merger to create the largest multiplex chain in the country with a network of more than 1,500 screens to unlock the opportunities in tier III, IV and V cities, besides in the developed markets. Earlier, PVR and Inox Leisure used to operate as separate entities. However, the rise of over-the-top (OTT) platforms and the COVID-19 pandemic led to the merger of the two multiplex chains. The name change post scheme of amalgamation between INOX Leisure and PVR  came into effect on April 20, 2023, and since then 'PVR Limited' is known as 'PVR INOX Limited'.

PVR-Inox's Q4 numbers

The cinema exhibitor reported a consolidated net loss of Rs 333.99 crore for the fourth quarter that ended on March 31, 2023. The company posted a net loss of Rs 105.49 crore in the January-March period a year ago. Its revenue from operations was at Rs 1,143.17 crore during the March 2023 quarter. It was Rs 536.17 crore in the year-ago period.

During the quarter ending March 2023, PVR Ltd and INOX Leisure merged and created a new identity PVR Inox Ltd. The merger was effective from February 6, 2023, hence the results are not comparable, the company said in a regulatory filing. 

Other analysts' views

Analysts at ICICI Securities, in its Q4 review note, mentioned that PVR’s share price has been flat over the past five years and hence they believe that with the strong content pipeline, recovery will be seen in the stock, although the timing is uncertain. Near-term monitorable is big-ticket content performance, which has seen inconsistency in performance, post-COVID. 

For the medium term, a key trigger will be the fructification of synergy benefits, they added. The brokerage maintained a "BUY" rating on the stock with a target price of Rs 1,640. Key risks, according to the brokerage are, delay in ad revenues recovery and continued volatility in content performance.

IDBI Capital has also a 'BUY' rating on the stock with a target price of Rs 1,740. In its Q4 review note, the brokerage said, "We believe in the near term there is still uncertainty on content and hence we are now keeping occupancy levels at 25 per cent (below the pre-covid average of 35 per cent). We believe that a certain amount of occupancy loss can be managed by improving pricing & cost rationalisation. Hence, we expect margins to reach pre-COVID levels of 18 per cent in FY25E."

At present, PVR-Inox has 1,689 screens across 115 cities (India and Sri Lanka) with 361 properties and an aggregate seating capacity of 3.59 lakh seats.

PVR-Inox's financial snapshot

Source: Screener.in

PVR-Inox share price

The stock ended over 3 per cent lower at Rs 1,450.45 on the BSE on Friday. Its 52-week high level is Rs 2,211.55, which was touched on August 4, 2022 (before the merger).