PL Stock Report: PVR Inox (PVRINOX IN) - Q1FY24 Result Update - Bollywood recovery under sight - BUY

PVR Inox (PVRINOX IN) - Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd

Rating: BUY | CMP: Rs1,565 | TP: Rs1,797

Q1FY24 Result Update - Bollywood recovery under sight

Quick Pointers:

§ Proforma (assuming consolidation in base quarter) SPH increased 10% YoY to Rs130.

In a subdued quarter, PVR-Inox’s performance was broadly in-line with footfalls of 33.9mn (PLe 33mn) and pre-IND AS EBITDA margin of 6.2% (PLe 5.8%). After the recent success of “Barbenheimer” and MI-7, Bollywood has an interesting pipeline with movies like Oh My God-2, Gadar-2, Jawan and Dream Girl-2 lined up for release in next 2 months. Even regional pipeline is healthy with movies like Jailor, Bhola Shankar and Salaar gearing up for release in 2QFY24. Though there are concerns over persistent high volatility in Bollywood genre 1) sustenance in KPIs (ATP/SPH up 2%/10% YoY on proforma basis), 2) expected back ended recovery in ad-revenues (a high margin business) and 3) strategy to penetrate deeper in Southern market (a high footfall geography) is expected to aid growth and margins. Consequently, we expect footfalls of 154mn/166mn with pre-IND AS EBITDA margin of 16.2%/17.8% for FY24E/FY25E respectively. Retain ‘BUY’ on the stock with a TP of Rs1,797 (earlier Rs1,704) after assigning EV/EBITDA of 14.5x as we roll-forward to FY25E.

Proforma revenue down 16.6% YoY: Top-line increased 33% YoY to Rs13,049mn (PLe Rs13,414mn) due to consolidation impact with Inox Leisure. However, proforma revenue (assuming consolidation in base quarter) was down 16.6% YoY. Proforma footfalls were down 22% YoY to 33.9mn (PLe of 33mn). Proforma ATP/SPH was up 2%/10% YoY to Rs246/Rs130 respectively, while occupancy stood at 22.3%.

Pre Ind-AS EBITDA margin of 6.2%: Proforma pre Ind-AS EBITDA declined 74.2% YoY to Rs805mn (PLe Rs776mn) with a margin of 6.2%. Pre-IND AS loss stood at Rs441mn (PLe loss of Rs290mn) versus proforma pre-IND AS PAT of Rs1,424mn in 1QFY23.

Con-call highlights: 1) Hollywood strike is unlikely to have any near term impact on content flow. Resolution is expected over next 4-6 weeks. 2) SPH was up 9% QoQ as menus have been redesigned and lot of Inox properties have now started selling non-veg food. 3) Response to screening of trailer shows has been good with occupancy of 22% (footfalls were 0.3mn in 1QFY24). 4) Share of premium screens was 13.5% in 1QFY24 and in long term, the share is expected to rise to ~15-20%. 5) Convenience fee revenue was down 23% YoY, as new contract with BMS is on revenue share basis and there was a drop in admissions due to weak content. 6) PVR will screen select cricket world cup matches in cinemas and is likely to enter into a contract with ICC soon. 7) Roughly ~40-45% of new screen addition will happen in South India. 8) Rental contracts for new properties are mostly on revenue share basis or minimum guarantee (MG) whichever is higher. 9) The existing loyalty program which has 40mn members will likely wind-up and a new plan will be launched in 2H 10) Power cost was up 39% QoQ due to seasonality (summer in 1QFY24). 11) On track to open ~150-160 screens in FY24E.

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