ICICI Securities’ latest report highlights the impressive performance of PVR Inox in Q1FY24, surpassing revenue estimates due to the favorable impact of merger synergies. Despite challenges posed by the muted performance of some big-budget movies, the company recorded commendable growth in key metrics.
Furthermore, with the recent surge in movie-going momentum among premium viewers, the outlook for Q2 and Q3 appears promising, buoyed by a robust content line-up. The stock’s meaningful correction in historical multiples, driven by concerns over OTT disruption, is deemed unwarranted, making it an attractive investment opportunity.
The uptick in Sequential Performance
In Q1FY24, PVR Inox reported a revenue of INR 13.04 billion, marking a notable 14% quarter-on-quarter (QoQ) increase and a -17% year-on-year (YoY) decline on a pro forma basis. The gross profit margin remained steady at 69%. Employee costs rose by 3% QoQ, while EBITDA (adjusted for Ind-AS) soared to INR 808 million, a significant improvement compared to INR 54 million in Q4FY23. The net loss also reduced to INR 816 million in Q1FY24 from INR 3.3 billion in Q4FY23.
Admissions witnessed an impressive 11% QoQ growth, reaching 33.9 million in Q1FY24. This increase can be attributed to improvements in the number of shows per screen. Average ticket prices experienced a growth of 2.9% QoQ, reaching INR 246, while the Food and Beverage (F&B) spend per patron increased by 9.2% QoQ, amounting to INR 130.
Merger synergies began to take effect, contributing to the growth in ticketing revenue by 15.4% QoQ, despite a muted April’23. F&B revenue surged by 22% QoQ, reaching INR 4.2 billion, driven by higher admissions and screen per hour (SPH). Ad revenue remained relatively flat QoQ. Additionally, PVR added 17 screens on a net basis during Q1FY24.
Management Commentary
The management of PVR Inox expressed optimism regarding the volatility in the performance of Hindi movies, noting a reduction in the negative sentiment surrounding the movie exhibition business. The successful audience draws for medium-tier films like ‘Zara Hatke Zara Bachke’ contributes to this growing confidence.
The management believes that the current content line-up for FY24 holds strong potential for robust performance. Furthermore, they anticipate that most of the ATP (average ticket price) synergies will continue to yield positive results in the coming quarters, with SPH already showing promising outcomes.
The 9% QoQ increase in SPH is attributed to several factors, including changes in the menu, the introduction of new Stock Keeping Units (SKUs), and the incorporation of non-vegetarian items in some INOX properties. Looking ahead, the management remains hopeful that if big-budget movies perform well in Q2FY24, the F&B attachment rates, driven by value-for-money offerings, will improve significantly, positively impacting both ATP and SPH metrics.
| Company | PVR INOX |
|---|---|
| AUTHOR | ICICI Securities |
| DATE | 02 August 2023 |
| CMP | INR 1,565 T |
| TARGET Price | INR 1,950 |
| Type | Buy |
| Report |
ICICI Securities’ analysis of PVR Inox’s Q1FY24 performance underscores the company’s resilience in the face of challenges. The successful realization of merger synergies, along with the recent surge in movie-going momentum, positions PVR Inox for potentially breakthrough quarters in Q2 and Q3. The correction in the stock’s historical multiples, driven by OTT disruption concerns, is seen as unjustified, making the stock an attractive “BUY” recommendation.
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