Unlocking Blockbuster Potential: ICICI Securities Recommends Buying PVR Inox, Sets Target at Rs 1950

PVR and Inox Cinemas have exceeded revenue expectations in the first quarter of the fiscal year 2024 (Q1FY24), benefiting from the positive effects of merging operations (+9% quarter-on-quarter growth in screen per hour and +3% quarter-on-quarter growth in average ticket price).

Despite a relatively steady theater occupancy rate (+10 basis points quarter-on-quarter), ticket sales have increased by 11% quarter-on-quarter. This impressive performance is notable considering the mixed reception of some major blockbuster films during Q1FY24. As the trend of "movie-going" gains momentum, particularly among high-end audiences, boosted by the releases of movies like 'MI7', 'Oppenheimer', and 'Barbie', the second and third quarters (Q2 and Q3) have the potential to be pivotal for PVR and Inox.

The upcoming content lineup, including films like 'OMG 2', 'Gadar 2', and 'Jawan', positions these quarters for success.

Addressing concerns that the rise of Over-The-Top (OTT) streaming platforms might negatively impact the relevance of traditional movie exhibition, it's asserted that such concerns are unwarranted.

Despite this worry, the stock value had experienced a significant decrease from its historical multiples.

However, this report maintains a positive outlook and reiterates a BUY recommendation for investing in this stock.

Looking ahead, the content schedule for PVR and Inox is predicted to improve starting from Q2FY24E, aligning with an anticipated increase in theater occupancy. The analysis factors in a projected revenue growth of 9.2% (pro-forma) for the fiscal year 2024, accompanied by a 560 basis points expansion in Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin (pro-forma).

Consequently, the target stock price remains at INR 1,950, with an unchanged multiple of 16 times the EBITDA estimated for the fiscal year 2025. This assessment underscores the potential for continued success and growth for PVR and Inox Cinemas in the foreseeable future.

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