Hold PVR Inox; target of Rs 1040: Prabhudas Lilladher

Prabhudas Lilladher's research report on PVR Inox

PVRINOX reported better than expected performance with pre-IND AS EBITDA loss of Rs110mn (PLe loss of Rs366mn) led by better cost control (on same-store basis fixed cost was up 0.4% YoY to Rs7,639mn). Given the ongoing challenges surrounding footfall growth, PVRINOX is now in a reset mode where the focus is to 1) rationalize cost, 2) reduce debt and 3) migrate towards an asset light model with an aim to conserve cash. Progress on cost rationalization exercise is noteworthy as fixed cost per screen has remained flat at ~Rs20mn over the last 5-years. Even the net debt is down by Rs4,782mn post-merger. Transition towards the asset light route is also progressing well with 101 screens signed till date. Overall, while the strategic initiatives taken to control cost and improve BS health are commendable, re-rating hinges on footfall recovery.

Outlook

We expect modest footfall CAGR of 6% over the next 2 years given persistent weakness in Bollywood with pre-IND AS EBITDA margin of 12.4%/15.7% for FY26E/FY27E. Retain ‘HOLD’ on the stock with a TP of Rs1,040 (11x Sep-26 EBITDA; no change in target multiple).