PVR Inox shares fell nearly a percent on July 23 as brokerages slashed target prices on the stock after the company reported a weak set of numbers for the fiscal first quarter (Q1FY25).
PVR INOX's net loss widened 119 percent on-year to Rs 180 crore and net sales fell 8.75 percent YoY to Rs. 1,190.70 crore due to general elections, and a Cricket-heavy season which resulted in a 13 percent YoY drop in movie releases.
Weak ticketing and Food and beverage (F&B) revenue, coupled with operating deleverage, led to a net loss of Rs 140 crore, according to analysts. Absence of tent-pole content impacted admits, occupancy and average ticket price (ATP).
The rise in Opex/Screen pulled down core margins further. However, Kalki’s strong performance suggests movie-going remains solely content-driven.
A strong line-up of movies across languages means the next two quarters should be sequentially stronger for PVR INOX, according to analysts at JM Financial. Notwithstanding a weak start, management believes FY25 admits could be similar to FY24’s, underscoring its confidence in the content pipeline.
Receding impact of Hollywood strike should help normalise release calendar next year, translating into more consistent financial performance. That should help realise revenue synergies of the merger.
Management’s calibrated approach on screen addition, gradual pivot to asset-light model and planned divestment of non-core properties should aid free cash flow, said JM Financial.
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PVR Inox’s scale and financial discipline could facilitate further consolidation in the space, driving market share gains, said JMFL as it remained constructive on stock and reiterated the 'buy' rating. However, it trimmed the target price to Rs 2,040 from Rs 2,070 earlier.
Stable occupancies, healthy recovery in advertising revenues, increased risk of rising scale, and the traction of movie releases over OTT platforms continue to be the key monitorables according to Motilal Oswal.
"Maintaining occupancy and traction in ad revenues amid an increasing threat from deep-pocketed OTT players remains a key catalyst for growth," the brokerage said as it maintained a 'neutral' rating on the stock with a reduced target price of Rs 1,450 per share.
With its primary focus on the movie exhibition business, the combined entity (PVR+INOX) will continue to ramp up margin-accretive segments such as F&B revenues and advertisement revenues, which in Nuvama's view will drive the EBITDA expansion for the business.
Aggressive expansion and focus on innovation will deliver growth for the business over the longer term, the brokerage noted as it held a 'buy' call on the stock but revised the target price downwards to Rs 1,855 from Rs 1,995 earlier.
Also Read | PVR INOX Consolidated June 2024 Net Sales at Rs 1,190.70 crore, down 8.75% YoY
At 9:30 am, PVR INOX shares were trading 0.8 percent lower at Rs 1,417.90 on the National Stock Exchange (NSE). The stock has slumped 5 percent in the last one year, underperforming benchmark Nifty which has risen 24 percent during this period.
Unavailability of quality content, Slowdown in consumer discretionary spending, Delay in the rollout of proposed multiplexes, and Competition from other forms of entertainment such as OTT platforms and digital video platform remain the key risks for the stock.
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