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Strong start to FY26; Box office momentum to remain strong

• PVR INOX delivered a strong start to FY26, with footfalls improving 12% YoY, driven by improved performance from Bollywood and a rebound in Hollywood collections. ATP grew 8% YoY and SPH rose 10% YoY to an alltime high for a 23% YoY growth in revenue.
• Cost discipline remained strong with fixed costs rising just ~3% YoY, due to various initiatives to make expenses more variable in line with revenue growth. As a result, pre-INDAS EBITDA came in at INR953m (24% beat) and margins expanded 6.5% (115bp beat).
• Backed by a strong content slate across languages and tactical levers such as ‘Blockbuster Tuesday’, re-releases, and event streaming, management expects FY26 admissions to surpass FY24 levels (~150m).
• Nevertheless, PVR INOX’s business remains highly sensitive to occupancy levels, which are dependent on the quality and consistency of content, a factor largely outside the company’s control. While management remains optimistic about the FY26 content pipeline, even a 200-300bp decline in occupancy could materially impact screen-level economics and EBITDA performance, posing a downside risk to our current estimates.
• We raise our FY26-27E EBITDA by ~1-3%, driven by better cost controls. We reiterate our Neutral rating with a TP of INR1,180, premised on 12.5x preInd-AS 116 Sep’27E EBITDA.

Sharp revenue recovery; strong beat on margins

• Consolidated revenue grew 23% YoY (18% QoQ) to INR14.7b (in line), driven by a recovery in box office collections.
• Ticketing revenue at INR7.3b (+13% QoQ) rose 23% YoY, driven by 12% YoY increase in admissions (occupancy up ~165bp YoY to 22%) and 8% YoY improvement in ATP to INR254 (-1.5% QoQ). During 1Q, there were several INR1b+ GBOC movies, while the Hollywood slate improved with titles such as F1 and Mission Impossible.
• F&B revenue at INR4.9b (+29% QoQ) rose 22% YoY, driven by higher spends per head (SPH), which grew 10% YoY to INR148 (+18% QoQ), and higher admissions.
• Ad revenues grew 17% YoY (+14% QoQ) to INR1.1b.
• PVR INOX was back in the green with a pre Ind-AS 116 EBITDA of INR953m (24% ahead of our est. INR768m)
• Movie exhibition cost at INR2.5b (+14% YoY) came in at ~38.5% as % of ticketing revenue (vs. 39% QoQ, 41% YoY).
• F&B COGS at INR1.2b (+19% YoY), came in at ~24.3% of F&B sales (down 70bp YoY, 26.2% QoQ).
• However, the company reported a loss of INR334m (significantly lower QoQ and YoY, our est. of INR421m loss). ?
• It opened 20 new screens during the quarter, of which 14 were under FOCO and asset-light models. Additionally, 55 new screens are signed currently under FOCO and 72 under the asset-light model.
• Outlook: The company expects to open 90-100 new screens in FY26 (20 added so far in FY26TD).

Highlights from the management commentary

• Box office trends: PVR INOX delivered a robust 1QFY26 performance (revenue up 23% YoY), driven by strong performance by Hindi cinema (+38% YoY) and a rebound in Hollywood collections (+72% YoY), driven by several tentpole movies. Premium formats saw a 20% YoY growth in admissions, driven by improved Hollywood content slate. Management further indicated that 2QFY26 and 3QFY26 should see sustained momentum, driven by an improving content slate across languages.
• Initiatives to improve footfalls: Admissions rose 12% YoY to 34m, driven by initiatives focused on affordability (the INR99 'Blockbuster Tuesday' offer reactivated ~1m dormant users), and alternate content (IPL streaming, concerts, and re-releases, which added 0.5m admissions). July delivered the highest monthly footfalls in 18 months, and management remains confident on FY26 admissions exceeding FY24 levels (~150m).
• F&B Performance: F&B’s SPH hit an all-time high of INR148 (up 10% YoY), primarily driven by better customer conversions rather than price hikes. Weekday value packs and refillable formats (for unlimited Pepsi and Popcorn) also improved the overall SPH.
• Karnataka Draft Regulation impact: The ticket price cap was a draft and is yet to be notified. The draft has received over 700 objections, and key details such as applicability on premium formats and tax inclusion/exclusion remain unclear at the moment. PVR INOX’s Karnataka expansion plans remain unchanged due to the draft regulation.
• Capex guidance for FY26 remains at INR4.0-4.25b, of which INR2.5-2.6b has been earmarked for new screens. The capital-light strategy is expected to accelerate expansion, improve RoCE, and support further deleveraging (net debt down INR607m QoQ to INR8.9b).

Valuation and view

• A recovery in Hollywood collections and promising content slate bode well for PVR INOX, given its skew toward premium screening formats.
• Initiatives such as ‘Blockbuster Tuesdays’, curated re-releases, live sports screenings, and weekday value meal offers are driving an uplift in footfalls and SPH, aiding weekday monetization. These targeted interventions reflect a strategic effort to smoothen occupancy volatility and enhance per patron revenue, particularly during non-peak periods.
• Nevertheless, PVR INOX’s business remains highly sensitive to occupancy levels, which are dependent on the quality and consistency of content, a factor largely outside the company’s control. While management remains optimistic about the FY26 content pipeline, even a 200-300bp decline in occupancy could materially impact screen-level economics and EBITDA performance, posing a downside risk to our current estimates.
• We raise our FY26-27E EBITDA by ~1-3%, driven by better cost controls. We reiterate our Neutral rating with a TP of INR1,180, premised on 12.5x pre-IndAS 116 Sep’27E EBITDA.

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