Buy PVR Inox; target of Rs 2240: ICICI Securities

ICICI Securities research report on PVR Inox

Q3FY24 was a tale of two halves for PVR Inox. First half was impacted by cricket but second half recovered led by ‘Animal’, ‘Salaar’, ‘Tiger 3’ and ‘Dunki’. In fact, Dec’23 was the highest grossing month of CY23, given higher ATPs from big budget movies and an occupancy of 37%. Ad revenue recovery surprised positively which led to a beat in both revenue and adj. EBITDA. In 9MFY24, PVR Inox has already achieved adj. EBITDA of INR 7.1bn. Given a steady start to Q4FY24 (I-Sec est.: >25% occupancy in Jan’24) and a strong content line-up over Feb-Mar’24 (Hollywood comeback likely), we believe the company is on track to meet INR 10bn adj. EBITDA target in FY24. We believe a structural rerating is likely given: 1) PVR Inox’s adj. EBITDA margin in Q3FY24 was 1,340bps higher vs Q2FY23 (comparable occupancy) and is clearly indicative of a more robust business model post-merger, 2) total GBO in India growing ~12% compared to pre-covid levels in CY23 should dispel existential concerns from OTT competition. Maintain BUY.

Outlook

Our target price remains unchanged at INR 2,240 with a multiple of 16x FY26E adj. EBITDA.