Multiplex operators' shares in focus; PVR, Inox Leisure hit record highs

Shares of cinema theatre operators were in focus on Monnday with PVR (Rs 1,925) and Inox Leisure (Rs 399) hitting their respective all-time highs on expectation of strong earnings growth in October-December quarter (Q3FY20).

Shares of Inox Leisure rallied 6 per cent to Rs 399 after the company said it has commenced the commercial operations of four additional screens (with seating capacity of 378 seats) in the-existing multiplex cinema theatre in Indore. The stock surpassed its previous high of Rs 390 touched on November 4, 2019.

PVR too hit a new high of Rs 1,925, up 2 per cent during the session, surpassing its previous high of Rs 1,898 hit on September 26, in the intra-day trade on the BSE.

“In Q3FY20, the box office (BO) collection is estimated to surge 76 per cent year-on-year (YoY) to Rs 1,655 crore, led by better performance of War and addition of multiple movies (Commando 3, Ujda Chaman and Bhangraa Pa Le); this will translate into box office revenue growth of 35-40 per cent YoY based on Hindi alone. Further, films like 83 – Kapil Dev’s Biopic, Brahmastra, Krrish 4 would drive BO collection around 11-12 per cent for FY21E”, according to analysts at Elara Securities (India).

Apart from Bollywood, Hollywood pipeline looks promising, with Fast & Furious 9, Wonder Woman 1984, Jumanji: The Next Level, Terminator: Dark Fate where it commands a higher share will drive box office collection over FY20-21, analysts said.

The brokerage firm expects screen execution to remain strong for Inox and momentum to continue in the near term, given expansion in the premium format screens (Insignia, Megaplex & Screen X), which attract significantly higher average ticket price (ATP), which would drive a revenue CAGR of 20.4 per cent over FY19-22E. It has ‘buy’ rating on Inox Leisure with target price of Rs 490 per share.

“ For PVR, sustained double-digit growth in spend per head and inorganic expansion in screen addition would drive a revenue CAGR of 15 per cent over FY19-FY22E. However, concerns persist over footfalls and ad growth trajectory SSG, which is in the low single digits despite strong box office collections. We recommend ‘Accumulate’ with a target price of Rs 2,050 based on 12.5x one-year forward EV/EBITDA,” the brokerage firm said in November report.

In the past one month, Inox Leisure (up 9 per cent) and PVR (up 5 per cent) have outperformed the market by gaining over 4 per cent, as compared to a 2 per cent rise in the benchmark index.