Multiplex business is expected to face a subdued December quarter, primarily attributed to a decline in box office revenue. This downturn is likely to impact the Q3 earnings of India's leading theatre chains, including PVR Inox.
In the entertainment industry, actors such as Shah Rukh Khan and Sunny Deol demonstrated their skills through movies like Jawan and Gadar 2 in the September quarter of the fiscal year 2024. Yet, a relatively subdued performance in terms of hits during the third quarter has dampened the overall show.
Fewer hits, lower occupancy and a weak show in October and November has affected the business of PVR Inox, said analysts.
Lack of hits
After a blockbuster September quarter in FY24, industry wide box office collections declined 22 percent quarter-on-quarter (QoQ) to Rs 2,560 crore in Q3 FY24, noted brokerage firm Prabhudas Lilladher. Box office business was weaker on a sequential basis due to the high base of Q2 and because of paucity of content in the first 45 days.
"The performance in the southern cinema segment was relatively tepid in Q3," said Abhishek Jain, Head of Research, Arihant Capital.
The Cricket World Cup played between October 5 and November 19 last year had a substantial impact on overall collections, said Nitin Menon of NV Capital.
Also read: PVR Inox Q2 results: Profit at Rs 166.3 crore, record revenue at Rs 1,999.9 crore
Overall box office collections stood at Rs 2,560 crore aided by five movies including Tamil language film Leo, Salman Khan-starrer Tiger 3, Ranbir Kapoor's Animal, Dunki starring Shah Rukh Khan and Prabhas' Salaar that crossed Rs 100 crore mark during the quarter.
Movies like Fukrey 3 which released on September 28 and recorded a net box office collection of Rs 95.9 crore had a spill-over in Q3.
Movies that stood out in the December quarter were Telugu language film Bhagvanth Kesari with collections to the tune of Rs 84.7 crore, 12th Fail at Rs 53.8 crore and Sam Bahadur at Rs 92.4 crore.
The company had reported gross box office collections (GBOC) of Rs 1,335.8 crore in Q2, up 106 percent from Rs 648.1 crore in Q2 FY23 and Rs 830.3 crore in Q1 FY24. Hindi GBOC had increased to Rs 727.3 crore in Q2 from Rs 314.8 crore in Q2 FY23, rising 131 percent.
Also read: After a dismal start to festive season, theatres bank on Salman Khan's Tiger 3 for Diwali bonanza
Lower occupancy
While occupancy in December is estimated to be around 30-32 percent, overall occupancy in Q3 remained subdued at 25 percent because occupancy levels in October and November were below par due to weak content.
"Occupancy levels were closer to 20 percent in October and November 2023, which is a 60 percent recovery versus pre-Covid levels. Exhibitors break-even (at the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) level) at 18-19 percent occupancy and such a performance will negatively affect profitability in Q3 FY24," said Karan Taurani, senior vice-president, Elara Capital.
Analyst Jinesh Joshi of Prabhudas Lilladher expects PVR-Inox to report modest performance with footfalls of 36 million and occupancy of around 24.5 percent in Q3.
Revenue and profit estimates
In Q3, PVR Inox is expected to report revenues of Rs 1,550 crore. The multiplex operator had reported revenue of Rs 1,999.9 crore in Q2, up sequentially from Rs 1,304.9 crore in Q1 FY24.
Also read: PVR Inox sees box office stability for Bollywood; bets big on SRK's Jawan and other releases
The company is expected to report a recurring profit after tax (PAT) of Rs 11 crore in the December quarter. PVR Inox had turned profitable in Q2 with a PAT of Rs 166.3 crore.
Metrics such as average ticket price (ATP) may remain flat sequentially in Q3 while spend per head (SPH) is likely to grow by around 5 percent which will provide some respite to overall profitability, said Elara Capital.
Taurani said that advertising revenue is expected to see 100 percent recovery versus pre-Covid levels due to the festive season. However, on a per screen basis, ad revenue is estimated to recover by around 85 percent.
PVR Inox’s box office revenue and food and beverages (F&B) revenue is expected to grow 17.6 percent and 17.2 percent respectively in Q3, Taurani added.
The company added 22 new screens in Q3 and 50 screens in the nine months of FY24. The guidance for FY24 is adding 100 screens.
Also read: PVR Inox turns profitable; here are the highlights of its Q2 performance
March quarter outlook
"I think the expectation from Fighter (starring Hrithik Roshan and Deepika Padukone) is huge and that should send the cash registers ringing. Apart from that Rajnikanth's Lal Salaam should be the movie in the regional market to watch out for. These movies should set the trend for FY24," said Menon.
However, exhibitors could face challenges over occupancy from January 2024 to June 2024 due to limited number of big scale films.
"Looking ahead to the fourth quarter, there is optimism for continued improvement on a year-over-year basis. However, sequentially vigilance is warranted due to the absence of major releases, apart from Fighter. Also, there was a lukewarm response to recent releases during Makar Sankranti festival, especially for (Telugu language film) Guntur Kaaram," Jain said.
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