Animal box office collection to hit Rs 60 cr-plus on Day 1? What Nuvama says on PVR Inox shares

Shares of PVR Inox Ltd will be in focus on Thursday, ahead of the release of Ranbir Kapoor-starrer Animal on December 1. Nuvama Institutional Equities in a note said its channel checks indicate strong numbers for ‘Animal’ at Rs 60 crore-plus on Day 1. Moreover, it expects the content slate to pick up over coming months. It noted that the initial part of the December quarter was muted for PVR Inox in terms of box office collections due to the Cricket World Cup.

"With the World Cup done and dusted, we expect occupancy to rebound in December. A dominant share in multiplexes and synergies bode well for PVR Inox. A gradual recovery in ad revenue (high-margin business) and focus on debt reduction are added positives. Hollywood content issues have been also resolved. Reiterate ‘BUY’ with a target of Rs 2,210," it said.

Nuvama cited several films that are lined up including Dunki (starring SRK), Salaar Part 1 (starring Prabhas) and Aquaman and the Lost Kingdom, Sam Bahadur (starring- Vicky Kaushal).

"Q3FY24 started on a muted note with few movies released from October to mid-November (due to Cricket World Cup). However movies such as Leo (gross Rs 350 crore), Fukrey 3 (net Rs 95.5 crore), Tiger 3 (net Rs 270 crore) and 12th Fail (net Rs 50.68 crore) had a good run at the box office during this period. Q2FY24 was the best-ever quarter for PVR Inox marked by highest-ever footfalls, F&B spends, recovery in ad revenue and occupancy reclaiming pre-pandemic levels," Nuvama said.

To compensate for fewer movies releases, PVR Inox offered screening of the Cricket World Cup across 150 cinemas in 60 cities, which led to some benefits, Nuvama noted.

At an occupancy level similar to that of the pre-pandemic era of 32 per cent, PVR Inox delivered a 433 bps higher Ebitda margin of 21.4 per cent in Q2FY24 versus 17.1 per cent in FY20.

"We expect margin to expand further driven by recovery in ad income, slower growth in fixed cost/screen compared with revenue/screen, and incremental synergy benefits of Rs 82–101 crore. As much as 60–70 per cent of synergies have been realised till Q2FY24. The gradual recovery of ad revenues, which currently stand at 70 per cent of FY20 per screen level are expected to further expand margins by 50–150bp over coming years," Nuvama said.

Nuvama said PVR Inox is exiting less profitable properties and closed 33 screens in H1FY24, and expects to exit 60 screens in FY24. As of H1FY24, PVR INOX has reduced net debt by Rs 327.60 crore.

"The company has plans to reduce financial leverage. The weekday Rs 99 offer and weekend unlimited refill offer have driven an uptick in consumption at cinemas, which would entice more people to come and watch movies. The company has launched a pilot project called the PVR Inox Passport, which is a monthly pass for 10 movies for Rs 699. This has generated a buzz among consumers, and more such steps might continue," the brokerage noted.

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