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Subpar movie slate drags down performance

PVR Inox’s results reflect the subpar box-office collections during the quarter due to a weak slate of movie-lineup, given the general elections happening over an extended period, and the IPL and T20 World Cup held during Q1. Footfalls fell further to 30.4mn, down 6.7% QoQ, whereas ATP inched up marginally to Rs235 from Rs233 in Q4 albeit still impacted by the lack of big-budget releases and higher promotional offers. Occupancy was weak at 20.6%. Select small-tomid-budget movies did see some traction, though not enough to move the needle. The management is taking steps to drive higher revenue and to optimize costs, but these are likely to fructify only in the medium term. The near-term movie pipeline has improved which should result in some pick-up in collections going ahead. We cut FY25E/26E EBITDA by 9%/2%, to factor in the Q1 performance; also, we introduce FY27 estimates. We maintain BUY on the stock, with unchanged TP of Rs1,650/sh (roll-over to Jun-26E pre-IndAS EBITDA).

Results Summary

Revenue declined 5.2% QoQ to Rs11.9bn, broadly in line with our estimates. ATP improved marginally to Rs235 from Rs233 in Q4FY24, but is still trending at lower levels due to lack of big-budget films and given promotional offers. Also, SPH improved to Rs134 from Rs129 in Q4FY24. Occupancy declined to 20.3% from 22.6% in Q4, while Admits fell 6.7% QoQ to 30.4mn. Advertisement revenue also declined 10.6% QoQ to Rs0.9bn, owing to inconsistent performance of movies. Reported EBITDA declined 9.7% QoQ to Rs2.5bn – higher than our estimate. Adjusted for IndAS, EBITDA loss was Rs327mn. The company reported net loss of Rs1.8bn. The multiplex chain opened 50 screens in the quarter, while shutting down another 14. It is on track to open 120 screens in FY25 and shut 50-60. Gross debt decreased, from Rs17.2bn to Rs16.9bn, whereas net debt inched up, from Rs12.9bn to Rs13.2bn.

Earnings Call KTAs

1) Quarterly Results: The quarterly performance was hit by the 2024 General Elections, with 13% drop in the number of releases (YoY) and only 3 movies crossing the Rs1- billion mark. In this quarter, 1.25mn admits were from re-release of movies. 2) ATP: The company has always followed the flexi pricing model. It did increase ticket prices by 4% YoY, to pass on the higher inflation to customers, but given lack of blockbuster movies, reported ATP was lower. Beginning-Q2 has seen strong growth in ATP. 3) Pipeline: The management does not see any more external events hampering the pipeline. The CY25/FY26 content pipeline should be back to pre-Covid levels, with Q3FY25 expected to be the strongest quarter in the year. 4) Passport Program: The company has already sold 0.25mn passes, and expects a pickup as the content pipeline improves. 5) OTT Window period: The general viewpoint across stakeholders is that the OTT window period should be common across languages. 6) JV with Devyani International: This JV has already been set up, with 2 food courts expected to be operational in coming 2-3 months, and 4-5 courts expected to be operational by FY25-end. 7) Media reports on additional cess in Karnataka: There is no confirmation that this is a definitive order. If the cess were to be imposed, it would be detrimental for the industry. 8) Expenses: Like-to-like rentals have increased 3.7% YoY, in line with lease agreements, with total fixed costs rising 7% YoY; of this, 4-4.5% cost is on account of new cinemas opened last year.

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