Multiplex stocks hit rock-bottom; should you buy them now?

By Nasrin Sultana

The ongoing final year exams, Cricket World Cup and the euphoria over forthcoming IPL have taken a toll on the multiplex stocks in the January-March quarter. During this period, most multiplex scrips were trading at or were near their 52-week lows. For instance, while PVR had touched 52-week low at Rs 93.50 on March 22, Cinemax and Fame India toppled to 52-week low at Rs 39.70 and Rs 39.50, respectively on March 15. Inox had hit its 52-week low at Rs 41.00 on February 9. Reliance MediaWorks (that houses Big Cinemas), touched its one-year low of Rs 122.25 on February 9. It recovered 22.99% from its previous close on March 23. Is it the best time to get into multiplex stocks? Archana Shivane, analyst at KR Choksey, thinks that multiplex stocks are poised for a further downfall from the current level. She suggests avoiding these stocks as earnings of January-March quarter is likely to be muted due to lack of occupancy. Even Oscar awarded films like Kings Speech and Black Swan have failed to attract audience. Analysts feel that if compared to a year-on-year basis, the fourth quarter of FY11 has suffered exceptionally and margins of these companies will be deeply hurt. This will further affect sentiments of investors. The next quarter too does not look rosy for the exhibition business industry. Just after the Cricket World Cup gets over,  the Indian Premier League  (April 8 - May 28 )  will again eat into the movie-going audience. However, another media analyst feels that cricket-fatigue might creep in during the first quarter of FY12 and there might be some revival in the business. He said, "Occupancy which has fallen to almost 15-20% in most theatres might go up in the April-June period as there are a good number of films in the pipeline." He does not recommend buying these stocks right now. Chitrangda Kapur, Research Analyst, Angel Broking advises to buy multiplex stocks only for a long term investment purpose. Among others, PVR is the best pick of Kapur as it is backed up by a strong management and is also into diversified business. Rajesh Babu A of Firstcall Research recommends PVR and Inox Leisure at this point of time. He is expecting recovery in multiplex stocks because of the upcoming summer vacation which will increase occupancy rate.
 
However, Babu A says, "There will be pressure on the margins in the fourth quarter because fall in occupancy rate ; the affect on margins will be nearly 8% to  nearly 12% less.