Buy PVR Inox Ltd For Target Rs.1,309 by Prabhudas Liladhar Capital Ltd
BS strength & capital efficiency improves
PVRINOX IN reported better than expected performance with pre-IND AS EBITDA margin of 9.0% (PLe 8.0%) led by 22.1% YoY growth in ATP to Rs315 and 32.0% YoY growth in SPH to Rs165 aided by movies like Dhurandhar: The Revenge and Border-2. After generating FCFF of Rs7,901mn, BS strength has improved considerably with net debt declining to Rs1,619mn in FY26. Further, a pivot towards capital light model (138 screens signed under FOCO/asset-light model) will not only enable cash preservation ensuring BS strength remains intact but will also aid in improving capital efficiency. We expect modest footfall CAGR of 4.7% over FY26-FY28E with pre-IND AS EBITDA margin of 14.0%/15.7% in FY27E/FY28E led by tight cost control and disciplined screen churn. PVRINOX IN trades at an attractive valuation of 9x/7x our FY27E/FY28E preIND AS EBITDA estimates. We retain BUY on the stock with a TP of Rs1,309 (9.5x FY28E pre-IND AS EBITDA; no change in target multiple).
Top line increased 25.8% YoY:
Top line increased 25.8% YoY to Rs15,473mn (PLe Rs14,906mn) mainly led by movies like Dhurandhar 2 and Border 2. Footfalls for the quarter increased 1.6% YoY to 31.0mn (Ple 30.7mn) while occupancy stood at 23.9%. In 4QFY26, Gross ATP increased 22.1% YoY to Rs315 (PLe of Rs310) while gross F&B SPH increased by 32.0% YoY to Rs165 (PLe of Rs160).
Pre-Ind AS EBITDA margin at 9.0%
Ind-AS adjusted EBITDA came in at Rs1,388mn (PLe Ind-AS adjusted EBITDA of Rs1,191mn) with a margin of 9.0% as compared to a loss of Rs43mn in 4QFY25. Ind-AS adjusted EBITDA was higher than our estimate due to lower employee benefit expenses at Rs1,778mn (PLe Rs1,935mn). Ind-AS adjusted PAT stood at Rs75mn. After adjusting for an exceptional item of ~Rs40mn pertaining to employee benefits arising from new labour code norms, Ind-AS adjusted PAT came in at Rs115mn (PLe loss Rs170mn) as compared to an Ind-AS adjusted PAT loss of Rs1,014mn in 4QFY25. Reported profit for the quarter came in at Rs1,864mn which includes exceptional gain of Rs1,714mn (net of tax) on account of sale of Zea Maize Pvt Ltd (popcorn business).
Con-call highlights:
1) 120 new screens are expected to be opened in FY27E, with ~55-60% of additions expected under FOCO and asset-light formats.
2) PVRINOX IN plans to launch “smart screens” targeting tier 2/3 cities, with 2 pilot properties expected to open by mid-Jul’26. The target is to add 28-30 smart screens in FY27E.
3) Capex is pegged at Rs3,750-4,000mn for FY27E. This includes a sum of Rs2,200-2,500mn/Rs800-1,000mn towards new screens/renovations respectively, while the balance is earmarked to fund IT & maintenance capex.
4) Management fee income stood at Rs100mn in FY26, and the current annualized rate stands at ~Rs130-140mn, with healthy growth momentum.
5) Smart screen capex is ~30-40% lower than conventional multiplex formats, enabling affordable and cost-efficient expansion into smaller cities.
6) Gross debt is expected to decline from Rs7,586mn in FY26 to ~Rs5,000mn levels in near term.
7) Under the FOCO model, only management fees of ~10-14% of cinema’s topline is recorded in PVR INOX IN’s P&L.
8) Under the asset-light model, developers fund 40-80% of the overall cinema capex. PVR INOX IN capitalizes only its share of investment and consolidates the entire P&L, with the developer payout structured as rental expense in the books.
9) PVR INOX IN has a signed capital-light pipeline of 138 screens comprising 52 FOCO and 86 asset-light screens, expected to be executed over the next 18 months.
10) Screen exits reduced sharply to 18 in FY26 from 72 in FY25, indicating that postmerger portfolio rationalization is largely complete.
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