Accumulate PVR Inox; target of Rs 1878: Geojit

accumulate

Geojit's research report on PVR Inox

PVR Ltd. and Inox Leisure Ltd. merged on Jan-2023 and formed PVR Inox Ltd. It owns and operates multiplexes across 361 cinemas in 115 cities, with a total of 1,708 screens in India and Sri Lanka. Major income segments for them are box office, food & beverage (F&B) and advertisement (Ad). In Q2FY24, ATP (Average ticket price) rose to Rs.276, and SPH (Spend Per Head) reached Rs. 136, reflecting a QoQ growth of 12.2% and 4.6%, respectively. In Q2FY24, the total admits reached 48.4mn, showing a substantial 43% QoQ increase, mainly due to outstanding performances in both the Hindi and regional box office segments. Increased ATP, SPH, and total admits resulted in a record operational revenue of Rs. 2,000cr, resulting in 53% QoQ growth. Net debt reduced to Rs.1,103cr from Rs.1,430cr in Q2 FY24, with Rs.390cr paid off through free cash flow. More reductions are expected using future cash flows, targeting a 1:1 debt-to-EBITDA ratio.

Outlook

Given the increased trust in regional films, the management is strategically concentrating on the South Indian region, aiming to introduce an more screens. We expect a strong performance in the upcoming quarters due to a strong content lineup with the added benefits of synergy. However, valuation appears expensive at the current level. Hence, we downgrade our rating on the stock to Accumulate with a revised target price of Rs.1,878 at 2.5x FY25E EV/Sales.

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PVR Inox - 27 - 10-2023 - geo