Shares of PVR Inox Ltd will be in focus on Wednesday morning after the GST Council cut GST applied on food and beverages to 5 per cent from current 18 per cent. Analysts noted that various state governments and local bodies had in the last two years lobbied to apply different GST rates on different food items in cinema halls.
The fresh move is seen eliminating the disparities and provide clarity by ensuring that all food products are subject to a 5 per cent GST rate.
It is a positive news since it will save time and effort for the exhibitors in fighting the litigations against the states, anlaysts said. Shares of PVR Inox have fallen 17.44 per cent in 2023 so far against a 7 per cent rise in the BSE 500 index during the same period.
"In terms of financials and estimates, there is zero impact as we have assumed 5 per cent GST rate on F&B revenue, which has been the same since the time GST was introduced. We have a Reduce rating for PVR-Inox with a target price of Rs 1,510 based on 13 times one-year forward EV/EBITDA (pre IndAS)," said Karan Taurani of Elara Securities.
Clarification that food & beverage supplied in cinema halls should be taxed at 5 per cent is a welcome step and provides relief to industry avoiding prolonged disputes, said Pratik Jain, Partner at Price Waterhouse & Co LLP.
The reduction of GST rate on food items served in cinema halls will bring a cheer to movie goers,” said Rajat Bose, Partner, Shardul Amarchand Mangaldas & Co.
The GST council changes have come amid the kick start of the June quarter earnings season, with TCS and HCL Technologies set to announce their quarterly results today.
For OVR Inox, the June quarter earnings is likely to mimic recent quarters, a weak show. Marketmen tracking the sector noted that net box office collections (NBOC) for Bollywood and Hollywood genre, excluding regional movies, declined 14.6 per cent YoY to Rs 960 crore in 1QFY24. While The Kerala Story turned out to be a sleeper hit, subdued collections from movies like 'Kisi Ka Bhai Kisi Ki Jaan' (Rs 110 crore) and 'Adipurush' (Rs 280 crore) impacted overall performance for the quarter.
Analysts noted Adipurush's collections were sub-par, given the budget and huge expectations surrounding the movie that had pan-India appeal.
Brokerage Prabhudas Lilladher said it expects PVR-Inox to report footfalls of 3.3 crore for the quarter with pre Ind-AS Ebitda margin of 5.8 per cent. This brokerage has suggested a loss of Rs 70 crore for the March quarter. It sees revenue rising 17.3 per cent sequentially Rs 1,341.40 crore.
Given the likely weak Q1 show, it has cut its pre-IND AS Ebitda estimates for PVR-Inox by 9 per cent for FY24 and 8 per cent for FY25 but retain ‘BUY’ on the stock with a revised target of Rs 1,704 (14.5x Sep-24 EBITDA) as content pipeline for near-term is healthy with movies like Gadar-2, Oh My God-2, Jawan, Dream Girl-2, MI-Dead Reckoning and Oppenheimer in pipeline.
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