Buy PVR Inox; target of Rs 1950: ICICI Securities

ICICI Securities research report on PVR Inox

PVR Inox beat revenue estimates in Q1FY24, helped by flow through of merger synergies (+9% QoQ in SPH and +3% QoQ in ATP). Admits also increased 11% QoQ despite flattish occupancy (+10 bps QoQ) led by an increased number of shows per screen. We believe this is commendable given the muted performance of some big budget movies in Q1FY24. Now that ‘movie-going’ has gathered momentum among premium viewers aided by ‘MI7’, ‘Oppenheimer’ and ‘Barbie’, we believe Q2 and Q3 could be breakthrough quarters for PVR Inox, given its strong content line-up (OMG 2, Gadar 2, Jawan). The stock had corrected meaningfully from its historical multiples owing to investor concerns around the relevance of movie exhibition amidst OTT disruption. We believe these concerns are not warranted (link) and re-iterate BUY on this stock.

Outlook

We see the content pipeline for PVR Inox improving from Q2FY24E and occupancy levels improving in tandem. We have factored in 9.2% revenue growth (pro-forma) for FY24E with 560 bps EBITDA margin (pro-forma) expansion. Accordingly, our target price is INR 1,950 (maintained) with an unchanged multiple of 16x FY25E EBITDA.

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