Accumulate PVR Inox Ltd For Target Rs. 1,100 By Elara Capital
Shifting tides ahead
PVR Inox’s (PVRINOX IN) Q4 was as expected, hit by weak box office (BO) – Occupancy dropped to 20.5% (22.6% in Q4FY24), footfall declined 6.4%YoY to 30.5mn and net ATP rose 8.5%. H1FY26 content slate is promising, with expectations of stronger show. But occupancy post-COVID seems structurally lower at ~23% from 30%+. So, we cut EBITDA estimate by 9-11% for FY26E27E. We thus downgrade PVRINOX to Accumulate (from Buy) with TP pared to INR 1,100 (from INR 1,600) on 14x Jun-28E EV/EBITDA (pre-IND As). We introduce FY28E estimate.
Modest Q4 but visibility strong for H1FY26:Q4 revenue growth was in-line, down 0.5% YoY to INR 12.5bn, led by muted content in Q4 – only two content properties crossed INR 1bn mark. Chhavaa was the highest grossing film at INR 5.8bn (net Hindi), followed by Sky Force (INR 1.1bn). As per our assessment, H1 Hindi box office visibility is strong at INR 20bn (+33% YoY) led by big-ticket films (Kannappa, Housefull 5, War 2, Sitaare Zameen Par, Son of Sardar 2). Further, a strong Hollywood content pipeline shall support occupancy (Mission Impossible: The Final Reckoning, Final Destination: Bloodlines, Jurassic World Rebirth etc.).
Occupancy down led by poor box office show: Post strong Q3, momentum in box office slowed down, barring the performance of Chaava and Sky Force. Thus, occupancy was down to 20.5% (22.6% in Q4FY24), and resulted in footfall dropping 6.4% YoY to 30.5mn. With busy content slate in H1, expect occupancy to touch 24.5% in FY26E and 25% each in FY27E-28E. Net ATP rose 8.5% in Q4 but net SPH dropped 1.4% YoY. Expect ATP and SPH to post 1.7% and 3.0% CAGRs in FY25-28E, respectively. Ad revenue (per screen) dropped 4% YoY in Q4, owing to lower occupancy. In FY25, PVRINOX added net five screens. We expect 20 screens to be added in FY26E and 60 each in FY27E-28E.
Increased focus on capital light model; margin to remain in narrow band: PVRINOX is exercising multiple initiatives to support margins. It aims to add significant number of screens (~50% per estimate) under FOCO and asset light models, resulting in lower capex requirement per screen. However, this could be margin dilutive given the sharing agreements with developers. Overall, for sustained margin gains, operating leverage via better content performance is key lever. In FY25, PVRINOX posted an EBITDAM of 26.7% (down 297bps YoY). In FY26E-28E, we expect margin to be in the band of 27.7-28.8%.
Downgrade to Accumulate; TP pared to INR 1,100: Expect H1FY26 to be strong on a low base of H1FY25. Recovery in Hollywood content should augur well. Screen growth may be subdued (on content mix). Increased use of a capital light model is near term monitorable, especially given the muted content performance. Performance of key metrics, ATP and SPH, may be subdued until consistent box office show. Occupancy post Covid has dropped to 23.0% from ~30%+, which seems structural. So, we cut EBITDA estimates by 9%/11% for FY26E-27E and introduce FY28E. We pare TP to INR 1,100 (from INR 1,600), as we value PVRINOX at 14x Jun-28E EV/EBITDA (pre-IND As). Downgrade to Accumulate from Buy. Robust content performance and occupancy are key lever for growth.
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