Media Sector Update : Cinemas glitter but parks jitter by Jinesh Joshi Research Analyst at Prabhudas Lilladher Ltd
Cinemas glitter but parks jitter
Media: Industry-wide BO collections increased by 20.2% YoY to ~Rs31.7bn in 2QFY26E, primarily driven by titles like Saiyaara, Coolie, Mahavatar Narsimha, and War 2. Post COVID, this has been the third instance wherein industry-wide BO collections have surpassed ~Rs30bn mark led by strong performance from Bollywood and Hollywood movies. Accordingly, we expect PVRINOX IN’s footfalls to increase 13.5% YoY to 44.0mn with a pre-IND AS EBITDA margin of 15.4% in 2QFY26E. As for broadcasting, Z IN’s performance is likely to be weighed down by weak advertising environment while EBITDA margin is set to collapse to a single-digit mark of 6.0% due to higher content cost and A&P expenses amid launch of two new channels.
Entertainment: While headwinds in Kiddopia persist, consolidation of Curve Games, Fusebox, and Smaash is likely to support the growth trajectory for NAZARA IN. As for IMAGICAA IN, we expect footfalls to remain flat YoY to 0.25mn in a seasonally weak quarter with an EBITDA loss of Rs60mn.
Top pick: While Z IN is likely to report weak performance due to higher content cost and A&P spends amid launch of two new channels, EBITDA losses in ZEE5 are likely to decline by ~40-50%. With launch of new content, improvement in viewership share and re-entry of ZEE Anmol into the FTA category, we expect back-ended recovery in ad-revenues and margin trajectory. We maintain BUY with a TP of Rs161 (14x FY27E EPS)
Multiplex: Industry-wide BO collections (including regional movies) increased by 20.2% YoY to ~Rs31.7bn in 2QFY26E aided by movies like Saiyaara, Coolie, Mahavatar Narsimha, and War-2. Apart from these titles, movies like They Call Him OG, Lokah Chapter 1, Jurassic World-Rebirth, Jolly LLB 3, Su from So, Mirai, Hari Hara Hera Mallu and The Conjuring: Last Rites aided overall BO collections. Accordingly, we expect PVRINOX IN to report 13.5% YoY growth in footfalls to 44.0mn, with a pre-IND AS EBITDA margin of 15.4%. We maintain ‘HOLD’ on the stock with a TP of Rs1,191 (10.5x FY27E EBITDA; target multiple reduced from 11x to 10.5x as we roll forward).
Broadcasting: We expect Z IN to report a 2.6% YoY decline in top-line to Rs19.5bn led by weak ad-environment. Ad revenue is expected to decline by 12.3% YoY while subscription revenue is likely to witness a slight uptick of 4.1% YoY in 2QFY26E. EBITDA margin is likely to plummet to 6.0% led by higher content cost and A&P expenses amid launch of two new channels. Given weak performance in 2QFY26E, we cut our EPS estimates by 33%/9% for FY26E/FY27E but retain BUY on the stock with a TP to Rs161 (14x FY27E EPS; no change in target multiple) as we expect improvement in ad-environment and benefits of new channel launches to materialize from 2HFY26E.
Entertainment: NAZARA IN’s top-line is expected to increase by 70.8% YoY to Rs5,447mn in 2QFY26E driven by consolidation of Curve Games, Fusebox and Smaash. We expect EBITDA margin of 11.0% as consolidation of low margin esports entity, Nodwin, will be for a period of ~45 days. Nonetheless, this quarter is likely to be impacted by write-down of investment in PokerBaazi. After adjusting for bonus and split and excluding PokerBaazi from our SoTP valuation matrix, we arrive at a TP of Rs252 as we roll-forward our valuation to Sep-27E. We maintain HOLD on the stock.
We expect IMAGICAA IN’s topline to remain flat at Rs403mn in a seasonally weak quarter due to extended monsoons. We expect footfalls of 0.25mn with an EBITDA loss of Rs60mn in 2QFY26E. We expect the new water park at Ahmedabad to begin operations in FY29E and have re-aligned our capex and debt assumptions over the next 3 years. We maintain ‘BUY’ with a TP of Rs74 valuing the parks/hotels business at 21x FY27E EBITDA (no change in target multiple).
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