IGI Logo

Recovery in occupancy and improved pipeline to fuel recovery

* Hit by the Omicron COVID wave, the recovery process in PVR paused in 4QFY22, with flat admits QoQ and a 10% revenue miss (down 14% QoQ). Subsequently it again posted an operating loss and a net loss. ATP/SPH sustained at healthy levels of INR242/122, ~20 above pre-COVID levels.

* A recovery in occupancy, a healthy ATP on an exit basis, and a strong movie pipeline are key positives. A return to the exclusives screening window of eight weeks for Hindi movies by Jul’22 would allay the risk posed by OTT platforms. We largely maintain our estimates and Neutral rating

Revenue/EBITDA miss due to the Omicron COVID impact

* Revenue fell 14% QoQ to INR5b (10% miss, 45-50% below normalized base) as 4QFY22 was impacted by the Omicron COVID wave.

* Occupancies remained flat QoQ at 18%. ATP/SPH was strong at INR242/ INR122 after an improvement in 3QFY22.

* Fixed OPEX was 4% lower QoQ, 15-20% below its pre-COVID normalized base. On a pre-Ind AS 116 basis, adjusted for a forex reinstatement of INR87.2m towards its Sri Lankan arm, operating loss stood at INR656m.  Net loss widened to INR957m (v/s our estimated PAT of INR124m).

* Total screen count fell to 854 from 860, adjusting for the closure of 23 screens, where the lease had expired.

* Net debt stood ~INR9.3b (excluding lease liability), with a total liquidity of INR6.7b (including unutilized sanctioned credit lines).

Highlights from the management commentary

* Merger with Inox: PVR has filed a draft scheme with the exchanges and is awaiting approvals. The management expects the process to be completed within the next nine-to-ten months.

* It plans to add 125-130 screens annually at a capex of INR3.5-INR4b in FY23. The same will be funded via internal accruals.

* As stated by the management, the exclusive screening window for Hindi movies will return to normal levels of eight weeks by the end of Jul’22.

* Advertising revenue stood ~40% of pre-COVID levels on an exit basis. It should reach pre-COVID levels by 1QFY23.

Valuation and view

* Release of strong content in Mar’22, coupled with a strong recovery in admissions, led to a profitable position on an exit basis.

* Lead indicators for occupancies, ATP, and a robust movie pipeline offer strong growth opportunities in FY23.

* The risk emanating from rising scale and traction of movie releases over OTT platforms since the COVID-19 pandemic, coupled with subscriber growth and strong reception of mainstream actors on these platforms, as highlighted in our recent report, has kept us cautious on the Cinema space. We expect the dynamics of the industry to alter over time.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer