PL Sector Update: Multiplex - Sector Update – Can 2QFY24 be best ever for PVR-Inox in post pandemic era?

Multiplex - Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd

Sector Update – Can 2QFY24 be best ever for PVR-Inox in post pandemic era?

2QFY24 had a strong start with movies like MI-7 and Oppenheimer doing well at box office (BO). Subsequently, Gadar-2 and Jailor stormed the BO with collections of Rs4.1bn and Rs2.9bn respectively. So far, 6 movies have already breached the NBOC mark of Rs1bn in 2QFY24. In fact, given sharp turn-around in Bollywood, industry wide NBOC’s stood at ~Rs18.3bn in the first 2 months of 2QFY24. In context, industry wide NBOC was at ~Rs18.7bn/Rs18.6bn in 4QFY23/1QFY24 respectively.

Our view on what’s in store for PVR-Inox in 2QFY24?

Movies like Dream Girl-2, Jawan and Salaar are set to release in 2QFY24. Further, flicks like Gadar-2, Oh My God-2 and Jailor are still continuing their theatrical run and thus we expect industry wide NBOC’s to be healthy in this quarter. On a conservative basis, if we assume industry NBOC of Rs7.5bn in balance 38 days (24th Aug to 30th Sep), 2QFY24 may well end with a figure of Rs25.8bn (Rs18.3bn+Rs7.5bn). In 4QFY23/1QFY24, PVR-Inox’s share in industry wide NBOC was ~32%/~37% respectively. As Jailor and Gadar-2 have dominated BO in 2QFY24 we expect share of PVR-Inox to be similar to 4QFY23 (Jailor is a south centric film which has higher ratio of single screens while Gadar-2 is a typical massy/macho film that would appeal more to single screen audiences).

Based on these assumptions NBOC’s of PVR-Inox might well turn out to be Rs8.3bn (Rs25.8bn*32%) in 2QFY24. Assuming a 3% sequential growth, net ATP can be at Rs211. This would imply footfalls of 39.2mn (most critical determinant of profitability) in 2QFY24.

Now, in post-pandemic era, 1QFY23 was the best ever quarter for PVR-Inox with proforma (assuming consolidation) footfalls of 43.4mn and pre IND-AS EBITDA margin of 20%. If footfalls indeed turn out to be 39.2mn (10% short of 1QFY23), 2QFY24 might well turn out to be a exceptionally strong quarter, if not best ever. However, our calculations can be termed conservative as:-

♦ ATP growth can be higher this quarter as Oppenheimer witnessed high demand in IMAX format (commands higher ticker price).

♦ Ad-revenue is expected to register good performance given strong BO collections. Ad-income typically flows through to EBITDA and hence margin improvement is on the cards.

♦ Hollywood films have done well in 2QFY24 which should result in significant benefit for PVR-Inox as it has higher presence in metro and tier-1 markets.

Thus, overall, we expect 2QFY24 to register sharp improvement in performance. We retain BUY on the stock with a TP of Rs1,797.

PVR Inox (PVRINOX IN)

Rating: BUY | CMP: Rs1,708 | TP: Rs1,797