Rs 2,300 or Rs 1,700, where is PVR headed after Q2 loss?

Weak September quarter results by PVR surprised nobody, as poor Bollywood content hit box-office collections. Post Q2 numbers, however, many analysts believe the multiplex operator could stage a smart recovery in coming quarters, betting on better Bollywood pipeline. This is even as a few others believe the trend of 'weak content' attracting solid OTT viewership is concerning.

PVR had on Monday reported a net loss of Rs 71.23 crore for the September quarter against a loss of Rs 153 crore in the year-ago. Low footfalls and limited rise in average ticket prices hurt PVR’s bottom line.

The management attributed the tepid Q2 numbers to weak content slate, "but the same movies are raking in good viewership on OTT," said Motilal Oswal Securities.

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The brokerage gave Laal Singh Chadda and Dhakkad as examples, as the two movies saw a good traction on Netflix, even as they failed to impress the audience at the box office. 

"Underpinning hopes of better content pipeline in the coming months and addition of new screens, the management expects a recovery in admits. But the risk emanating from rising scale, the traction of movie releases over OTT platforms and the recent poor Box office collection have kept us cautious," Motilal Oswal said while suggesting a target of Rs 1,675 on the stock.

Not all brokerages are this cautious.

Emkay Global sees the PVR stock at Rs 2,340; JM Financial values the stock at Rs 2,210; Kotak Institutional Equities finds PVR’s fair value at Rs 2,200. Nuvama Institutional Equities sees the stock at Rs 2,161, ICICI Securities at Rs 2,100 and Prabhudas Lilladher at Rs 2,119.
On Tuesday, the scrip rose 2.30 per cent to hit a high of Rs 1,727.15 on BSE. The Emkay's target suggests a potential 35 per cent upside over this price. Motilal's target suggests a 3 per cent potential downside.

"In our view, content acceptance remains the primary factor for PVR's success. Despite the weak performance in the quarter, we maintain our FY24/25 estimates, in the hope of a Bollywood content-reversal. However, if this weakness persists, the risk of an earnings cut and a de-rating looms large," Emkay Global said.

ICICI Securities said PVR is incrementally changing its cost structure with rental and employee costs now having variable portions, thus cushioning margin decline during weak quarters.

"The weak print in September quarter is transitory in our view and our structural thesis on PVR remains intact," it said while cutting its EPS estimates by 29 per cent for FY23 and 7 per cent for FY24 on lower occupancy and weak ad revenue.

PVR said its revenues soared 470 per cent to Rs 686.72 crore for the quarter from Rs 120.32 crore in the year-ago period.

Even as Bollywood box office collections were subdued, regional and English movies fared well, said Kotak Institutional Equities. This brokerage expects the PVR business to gradually recover with improvement in Bollywood content.

Also read: As Shamshera, Laal Singh Chaddha & others disappoint, multiplexes stare at losses in Q2

Also read: PVR reports Rs 71 cr loss in Q2 as Bollywood’s underperformance continues to hit margins