IGI Logo

Pushpa 2: ‘Wildfire’ expected!

Much awaited Pushpa 2 is set to release on 5th Dec and has created a strong buzz on the box office with staggering advance booking collections of INR1bn+ globally. More than 1mn tickets have been booked in advance. Further, states of Telangana and Andhra Pradesh have relaxed pricing caps for 2-3 weeks post release, which is a move in positive direction for the industry. This bolsters our bullish view on PVR INOX. We remain optimistic on revival in occupancy rates and premiumization play in movie exhibition business. Maintain BUY with TP of Rs1,980.

* Robust Advance collections to uplift sentiments:

Domestic advance booking collections (including blocks) for Pushpa 2 have surpassed INR 917mn, making it one of the highest day 1 advance booking of all time at the Indian box office. Telangana and Andhra Pradesh were the key drivers with ~40% contribution followed by Maharashtra and Karnataka. As per industry reports, movie is expected to garner Rs1.6-1.7bn on day 1 followed by a blockbuster weekend with collection of Rs2bn+. Total collections are expected to surpass Rs8- 10bn, making it one of the highest grossing movies in India. Internationally, movie has garnered advance booking of ~USD3mn and is expected to record collections of ~Rs750-850mn on Day 1. Such strong response is likely to aid in revival of Indian movie exhibition industry and attract audience to cinema halls.

* Relaxation of price caps – A move in a right direction:

State governments of Andhra Pradesh and Telangana have approved the staggered ticket price hike for Pushpa-2, for a duration of 2-3 weeks post release. In Telangana, for multiplexes, ticket prices will increase by Rs200 from Dec 6 to 8, Rs150 from Dec 9 to 16, and Rs50 from Dec 17 to 23. While Andhra Pradesh has allowed price of Rs200 over existing rates for Multiplexes, for 13 days post release. This indicates significant price hike of est. 75-80% over existing rates. We believe this move bodes well for the growth of Indian movie industry and paves the way for premiumization of movie experience, especially in Southern markets. PVR INOX has ~160 screens (~9% of total) in Telangana and Andhra Pradesh combined and a dominant presence in Maharashtra and Karnataka, which have witnessed strong advance bookings. Thus, PVR INOX should strongly benefit from Pushpa-2

* Strong content pipeline to ensure healthy occupancy:

Content pipeline for next 12 months looks robust, both for Bollywood and Hollywood, with movies such as Lord of the rings, Zero se restart, Mufasa: The Lion King, Baby John slated to be released in December itself. Year 2025 also has a strong line-up including Fateh, Emergency, Azaad, Chhava, Captain America and much more. Such line-up shows that producers are aligning the content in-line with the consumers’ expectations. Thus, occupancy levels should gradually inch-up in medium term.

* Multiple superhits in recent times bolster our view:

Q3FY25 has seen a strong collection for movies such as Singham returns (Rs3bn) and Bhool Bhoolaiyya (Rs2.5bn+). Further, In FY25, Stree-2 witnessed highest ever gross BO collection of Rs7.1bn for a Hindi movie. Thus, consumers are willing to pay for good quality content, especially content which provides holistic theatrical experience.

* Outlook and Valuation:

Slew of blockbusters and strong content pipeline for December should result in a strong Q3 for PVR INOX. Over FY24-27E, we expect modest +120bps expansion in occupancy and estimate revenue/EBITDA CAGR of 9%/19%. We expect sharp increase in RPAT and expect it to reach Rs6.2bn by FY27E. Likely success of Pushpa-2 bolsters our view of revival in footfalls, and we believe worst is behind for the movie exhibition industry. We value PVR INOX at FY27E EV/EBITDA (Pre-IndAS) of 14x and arrive at TP of Rs1,980. Retain BUY.

Please refer disclaimer at https://yesinvest.in/privacy_policy_disclaimers
SEBI Registration number is INZ000185632