Buy PVR INOX Ltd For Target Rs. 1,425 By JM Financial Services
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PVR Inox reported an in-line operating performance. Revenues were flat YoY to INR 12.5bn (JMFe: INR 12.7bn). A weak line-up and underwhelming performance by Bollywood movies (barring Chhava) impacted GBOC. Admits declined 6% YoY to 30.5mn, driving down occupancy (20.5%, down 210bps YoY). This was however made up by a better ATP (+10.7% YoY). FY25 was marred by inconsistent flow of Bollywood/Hollywood releases, resulting in 14ppt decline in PVR Inox’s Hindi/English GBOC YoY. A strong line-up of both Bollywood and Hollywood releases could reverse that trend in FY26. That said, in spite of the non conducing box office performance, PVR Inox has continued its cost and execution rigour. Its fixed cost/screen has grown at merely 0.8% CAGR over FY20-25E, significantly below inflation. Its pivot to capital light model (FOCO + Asset light model) – 100% of new screen addition in FY26 – promises to improve return ratios. Better working capital and lower capex helped it reduce net debt further by INR 3.4bn in FY25, That should continue. These offset the impact of lower revenue growth on our DCF-based valuation. Our target price is down to INR 1,510 (from INR 1,610) despite maintaining long-term occupancy at current levels. Any sign of durable increase in occupancy will present upside to our TP. BUY.
* 4QFY25 – in-line performance: PVR Inox reported revenues of INR 12.5bn (-0.5% YoY / -27% QoQ), in line with JMFe (INR 12.7bn). Growth was led by 40% YoY increase in distribution income and 1.5% growth in Ticketing revenues. F&B revenues declined 8%. Reported EBITDA margin stood at 23% (+50 bps YoY), was in line with JMFe. Adjusted EBITDA (pre Ind-AS) stood at INR -719 Mn (vs JMFe INR -14 Mn). Total fixed costs and employee costs were controlled, aiding margins. Movie distribution expense also declined 10% YoY. The quarter saw a PAT loss of INR 1253 Mn (vs JMFe INR -1180 Mn). PAT loss reduced compared to 4QFY24 (INR -1295 Mn). PAT was aided by higher other income and lower finance cost. Net debt reduced by 4.4% sequentially to INR 9.5 bn (D/E: 0.21). Cash increased to INR 5.4 bn from INR 4.2 Bn in FY24.
* Operational metrics: PVR’s GBOC declined 25% QoQ to INR 7.8 bn. Top movies in the quarter were Chaava (INR 2.3 bn), Sky Force and Mufasa. Hollywood saw 40% QoQ decline in GBOC, Hindi/Regional saw 21%/25% QoQ GBOC decline. Company expects to open 100-110 new screens in FY26 under asset light model. They have signed 46 screens under management contract and 55 screens under asset light model. 22 screens were closed in the quarter. Admits declined 6.4% YoY (-18% QoQ) to 30.5mn. Re-releases (of old movies) contributed 5% to admits in FY25. Occupancy at 20.5% was in-line with JMFe. ATP increased 10.7% YoY (-8% QoQ) and SPH was flat YoY (-11% QoQ).
* Outlook- Execution rigor and promising line-up: The Company is focused on their four strategic initiatives. 1) - Creating footfalls (Re-releases), 2)- Cost control, 3)- Moving to a capital light model and 4)- Reducing debt. Management expects a rebound in occupancies in FY26 driven by a promising content line-up. Sitaare Zameen Par, War 2, Housefull 5, and Jolly LLB 3 in Hindi and Mission Impossible, Superman, Jurassic world and Avatar 3 in Hollywood are some of the notable films lined up.
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SEBI Registration Number is INM000010361
