 "PVR Inox dips 6%, hits over four-month low; stock down 12% in 2 weeks")
Shares of India's largest multiplex chain PVR Inox dipped 6 per cent to Rs 1,405.10, hitting an over four-month low on the BSE in Wednesday's intraday trade on profit booking. In the past two weeks, the stock has declined 12 per cent after the release of Allu Arjun's Pushpa 2 on December 5. Prior to that, in 12 trading days, between November 18 and December 5, the stock had rallied 13 per cent.
Meanwhile, thus far in the calendar year 2024, PVR Inox share price has underperformed the market by falling 15 per cent as compared to 11 per cent rise in the BSE Sensex.
PVR Inox is the market leader in multiplex space in India. Currently, it operates 1,747 screens in 111 cities across India and Sri Lanka.
In the first half (April to September) of the financial year 2024-25 (FY25), PVR Inox had reported a consolidated loss of Rs 114 crore, due to lower operating income. The company had posted profit after tax of Rs 163.3 crore in the same period last fiscal. Total income declined 14.76 per cent year-on-year (Y-o-Y) to Rs 2,850.50 crore from Rs 3,340 crore in H1FY24. Earnings before interest, taxes, depreciation, and amortisation (Ebitda) was down 53 per cent Y-o-Y at Rs 206.90 crore and margin contracted to 12.6 per cent from 22.1 per cent.
Despite a relatively weak H1FY25, PVR managed to reduce net debt by Rs 141 crore. De-leveraging is likely to be a key focus area for PVR ahead. The company also intends to enter into the Franchisee Owned, Company Operated (FOCO) model along with capex sharing contracts with landlords with an objective to bring down the overall capex by ~35-40 per cent. Furthermore, it also has non-core assets (real estate space), which may be liquidated to reduce debt, analysts at ICICI Securities had said post Q2 results.
The management remained confident that Q3 will be the best quarter of FY25, led by a strong content pipeline as there is significant room for growth in occupancy levels in CY25. The Ebitda margins are expected to improve further, with increased occupancy levels and operating leverage. The management continues to take proactive measures to control its fixed costs, particularly rentals. Additionally, it is also renegotiating rental agreements with developers of poor performing malls.
For FY25, it expects to open 110-120 new screens in FY25, with net screen addition of ~50 screens. The company plans to open 80-120 screens in FY26 with approximately 15 per cent of these screens under the FOCO model, 35 per cent - 50 per cent under asset light model and the remainder under the structured lease agreements.
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In terms of capex, the capex in H1FY25 stood at Rs 205 crore and the company has guided for capex of Rs 400 crore in FY25. It expects capex of Rs 500 crore in FY26, with a focus on allocating more capital for renovating high value high performing properties.
Meanwhile, analysts at Elara Capital expect 32 per cent occupancy in Q3, led by a strong content pipeline. Occupancy may converge to 25-27 per cent in Q4E (average trending occupancy post Covid). The brokerage firm said they largely maintain its annual occupancy estimate of 26.0 per cent in FY25E, which may improve 200bps Y-o-Y to 28.0 per cent in FY26E, helped by multiple large franchise-based films in the Hindi genre and English film releases scripting a revival.
Analysts further said they continue to believe that a good comeback by the Hindi/English genre is a key monitorable for higher profitability. Also, a shift to the FOCO model will help improve return ratios and provide some cushion against content not performing well in certain months.