PVR Inox Faces Challenging Six Months
Decline in Stock Value
PVR Inox has experienced a significant decline of about 18 per cent in the last six months. According to Emkay Global, this drop is primarily due to the lack of major movie releases in recent quarters. The June quarter also underperformed following a subpar March quarter, with events like the IPL, the T20 World Cup, and general elections creating obstacles for movie releases.
Recent Stock Performance
On Friday, PVR Inox shares saw a slight recovery, rising by 3.14 per cent to Rs 1,427.55. However, the stock remains 24 per cent below its 52-week high of Rs 1,879.75, which was reached on September 8, 2023.
High Fixed-Cost Structure and Profitability
Emkay Global highlighted that PVR Inox’s high fixed-cost structure has exacerbated profitability issues. Despite this, there is optimism for improvement as the company’s pipeline has strengthened, although major movie releases are expected only in 2025.
Management Initiatives
To address these challenges, PVR Inox management has initiated efforts on both revenue and cost fronts to maximize profitability. However, Emkay Global suggests that the impact of these initiatives may not be evident until the medium term.
Performance of Bollywood, Regional Movies, and Hollywood
The brokerage also noted that Bollywood’s performance has been inconsistent, while regional movies, especially in the South, have performed well. However, PVR Inox’s lower market share in the South has limited its benefits. Hollywood’s performance has been affected by the writers and actors’ strike, delaying normalization.
Audience Preferences and Structural Issues
Emkay Global observed that both Bollywood and Hollywood are still experiencing footfall below pre-Covid levels, whereas South Indian movies are doing relatively better. There is a noticeable trend where big-budget movies with unique content and experiences are performing well, but small-to-medium-budget movies are struggling as audiences prefer to wait for their OTT releases.
Future Outlook
With persistent structural issues, Emkay Global does not foresee occupancies rebounding to pre-Covid levels. Nevertheless, they maintain a BUY rating on PVR Inox with a target price of Rs 1,650 per share, based on 11.5x Mar-26E pre-Ind AS EBITDA. The stock’s performance is expected to improve with better box-office collections in the future.(Dubai7 realmoneygame)