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Robust Content pipeline improves outlook; Maintain BUY

Q3FY25 marked a turnaround for PVR INOX with PAT turning positive after 3 consecutive quarters of net losses. Q3 PAT materially beat our estimates led by better-than-expected operating margins, while revenue was broadly in-line with est. Content line-up for 2025 looks robust and much better YoY with Hollywood movies making a comeback. Line-up for Bollywood and regional films looks robust as well. We remain positive on the revival of movie exhibition industry and maintain BUY on PVRINOX. We make minor tweaks to our estimates and arrive at TP of Rs1,875.

Q3 PAT beats estimate driven by better ATP and SPH –

PVR reported significant improvement in OPM (+230bps QoQ/+50bps YoY) due to improvement in ATP and SPH for Q3. Company registered highest ever ATP and SPH for Q3 boosted by Pushpa-2 demand. ATP improved by +4%YoY/+9%QoQ while SPH reported +6%/+3% increase. As a result, PAT reported increase of +180% YoY, beating estimates while revenue was in-line. Movie ticket revenue reported growth of 6% YoY as benefit of strong December month was offset by subdued demand in October as much anticipated movies like Jigra and Joker 2 failed to make a mark on box office. In November, Hindi cinema rebounded with two Diwali hits, Singham Again and Bhool Bhulaiyaa 3, each earning approximately Rs3bn. Regional films continued their strong performance, with Amaran surpassing Rs 2.5bn. F&B revenue reported growth of ~9%YoY while Ad-income recovered sequentially with 36%QoQ/+6% YoY growth.

Stock performance

Content Pipeline for CY25 becomes even stronger –

CY2024 had witnessed high volatility in terms of content pipeline with lower number of good quality content in many weeks. However, scenario for CY25 seems to have drastically improved with pipeline looking more robust vs last year as well as QoQ. Hollywood has made a big comeback after a hiatus in CY24 due to impact of strikes which resulted in production delays. Many popular franchises have announced their launches for this year, including 3 movies from Marvel, Snow White from Disney, Superman, Karate Kid, Avatar 3, Jurassic World and much more. This is positive for PVRINOX as it commands ~55% mkt share in Hollywood movies and these movies typically enjoy premium ATPs and SPH. For Bollywood as well, content pipeline looks robust with movies such as Chhava, The Diplomat, Shankara and Sikandar slated to be released in Q4. Higher number of good quality and well-distributed content over the year reduced reliance on superblockbusters to deliver good performance. This particularly bodes well for PVR INOX.

Capital-light strategy to improve ROCE –

PVRINOX has signed 100 screens over 22 cinemas out of which 31 screens are via mgmt contracts (FOCO Mode) and 69 screens are part of asset-light model (40-80% capex by developer). For mgmt contracts, company will receive fees of 6-10% of revenues for respective screens with est. ~90% of flow-through to EBITDA. While through asset-light mode, capex burden will be substantially reduced, which is likely to improve ROCE. Asset-light strategy allows PVRINOX to leverage its brand and operational expertise with improved B/S quality. Mgmt has guided for capex of INR4bn for FY25 and INR4-5bn for FY26E. It plans to add 100-110 screens in FY26E with ~40% of screens to be added in South. We expect RoE/ROCE to reach 6.8%/7.1% by FY27E with Net Cash B/S.

Valuation and Outlook –

We make minor tweaks to our FY25E estimates but broadly maintain FY26/27E estimates. Over FY25-27E, we est revenue/EBITDA (PreIndAS) CAGR of 11%/23% with OPM expansion of +320bps led by increase in occupancy from 25.6% in FY24 to 26.5% by FY27E (+90bps). We est revival in Adincome with 14% CAGR over FY24-27E. Better content line-up for current year improves our outlook. We value the stock at FY27E EV/EBITDA multiple of ~14x. Maintain BUY with TP of INR1,875.

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