PVR Inox shares hit 44-month low; stock has tanked 23% from December high

In one year, PVR Inox has underperformed the market by falling 24 per cent, as compared to the 9 per cent rise in the BSE Sensex.

PVR Inox shares hit a 44-month low of Rs 1,154, declining 8 per cent on the BSE in Tuesday’s intraday trade in an otherwise firm market, driven by growth concerns. The stock has slipped 23 per cent from its December high of Rs 1,620, touched on December 5, 2024. It has fallen below its previous low of Rs 1,203.7 from June 4, 2024, and is trading at its lowest level since May 2021.

 

Shares of PVR Inox closed 2.2 per cent lower at Rs 1,223.05 on Tuesday, its lowest level since May 20, 2021, while the BSE Sensex closed 0.3 per cent higher at 78,199.

 

 

This sharp fall coincides with India reporting five cases of human metapneumovirus (hMPV) on Monday. The virus, which causes respiratory illness, was recently identified in China and Malaysia as well. Two cases were detected in Karnataka, two in Tamil Nadu, and one in Gujarat. All five confirmed cases were in children.

 

PVR Inox, the market leader in India’s multiplex space, operates 1,747 screens across 111 cities in India and Sri Lanka. Its revenue is primarily derived from box-office ticket sales, along with high-margin food and beverage sales, on-screen advertising, and convenience fees from online bookings.

 

Over the past year, PVR Inox has underperformed the market, falling 24 per cent, while the Sensex rose nearly 10 per cent.

 

Once synonymous with premium movie experiences and innovation, PVR Inox has faced several challenges in recent years. These include the Covid-19 pandemic, a weak content pipeline, competition from streaming platforms, rising costs, and financial stress, which have disrupted its growth trajectory.

 

The rise of streaming services like Netflix and Disney+ Hotstar has posed a challenge by offering an alternative to cinema. While PVR’s merger with Inox aimed to create scale and operational synergies, integrating the two large entities has been complex, delaying the realisation of benefits.

 

Independent and regional single-screen cinemas, offering cheaper tickets and concessions, have also gained market share, particularly in Tier-II and -III cities. The high price of tickets and food has deterred middle-class consumers, especially for non-peak screenings, according to analysts. 

 

In the first half/H1 (April to September) of 2024-25 (FY25), PVR Inox reported a consolidated loss of Rs 114 crore, down from a profit after tax of Rs 163.3 crore in the same period of 2023-24 (FY24). Total income declined by 14.76 per cent to Rs 2,850.5 crore from Rs 3,340 crore in H1FY24. Earnings before interest, tax, depreciation, and amortisation (Ebitda) dropped 53 per cent year-on-year to Rs 206.9 crore, and margins contracted to 12.6 per cent from 22.1 per cent.

 

The management has expressed confidence that the third quarter will be the best quarter of FY25, driven by a strong content pipeline and room for growth in occupancy levels in calendar year 2025. They expect Ebitda margins to improve further with increased occupancy and operating leverage, and they are actively working to control fixed costs, especially rentals. The company is renegotiating rental agreements with developers of underperforming malls.

 

Following a restructuring, the current screen count is around 1,700. Ventura Securities expects this to grow to 1,900 by 2026-27 (FY27), with a total capital expenditure of Rs 400-450 crore. The brokerage firm believes that recent successes like Stree 2 and Pushpa 2: The Rule suggest a recovery in occupancy levels, and it initiated coverage with a contrarian ‘buy’ call on PVR.

 

The brokerage conservatively estimates that PVR Inox’s revenue will grow at a 10.5 per cent compound annual growth rate (CAGR) to Rs 4,850 crore by FY27, driven by ticket sales, food and beverage, advertising income, and convenience fees. They expect Ebitda and net earnings to grow at a CAGR of 13.2 per cent and 25.4 per cent, respectively, over the same period.

 

The company’s management intends to use free cash flow to retire debt by 2028-29, which should improve return ratios (return on equity/return on invested capital) to 1.8 per cent and 27.2 per cent by FY27.

 

Ventura Securities cautioned that their estimates are based on conservative assumptions, and any significant traction could lead to significant upside risk to their projections. The primary drivers for this would be premium offerings and higher-than-estimated ticket prices.