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.

PVR to foray into Sri Lanka, open theater in collaboration with Shangri La

Film exhibition firm PVR on Friday announced its foray into the Sri Lankan market with the opening of its first theatre in collaboration with Shangri La Group.

PVR Lanka at One Galle Face Mall is a nine-screen property with premium luxury format besides dedicated auditorium for young ones and family, the company said in a regulatory filing.

"Entering Sri Lanka was part of our business strategy for FY19-20...the socio-cultural similarity between the two nations (India and Sri Lanka) makes the scope for business growth opulently clear," PVR Chairman and Managing Director Ajay Bijli said.

He further said the company's vision has been to introduce new concepts and make regional content more accessible for the audience in Sri Lanka.

"The Indian film industry has grown exponentially in the last few years and has a global fan base that we aim to cater to through innovation and expansion," Bijli added.

PVR said its first property in Sri Lanka is spread across 38,454 square feet with a seating capacity of 1,176.

The company has 809 screens at 171 properties in 70 cities in India.

Are Indians going to the movies to escape slowdown? PVR's CEO thinks so

Cinemas are seeing brisk business even as India’s economy slows to a six-year low and unemployment swells, according to PVR Ltd., the nation’s largest operator of multi-screen theatres.

Ever since the box-office hit Kabir Singh released in June, even films with small budgets or less-recognizable actors are drawing the crowds, Kamal Gianchandani, chief executive officer at PVR Pictures, said in an interview this month. Results for July-September will “definitely surprise a lot of people,” he said, declining to elaborate.

“I think the slowdown is helping the cinema business,” Gianchandani said. “There is negativity around and people want to escape it.”

If Gianchandani’s prediction is correct, PVR would be defying a slump that has dented demand for almost everything from 7-cent cookies to cars. He joins the likes of Bollywood megastar Shahrukh Khan, who has in the past compared movies to lipstick, saying that both are immune to economic turmoil.

Seventeen of 26 analysts surveyed by Bloomberg have buy ratings on PVR stock, with eight holds and one sell. Similar numbers can be seen for smaller Indian rival Inox Leisure Ltd. PVR will probably outperform Inox on spending per head, analysts led by Karan Taurani at Elara Securities Pvt. said October 4.

Sensing competition from the likes of Netflix Inc. and Reliance Industries Ltd.’s Jio service -- which allow people to watch movies from the comfort of their home -- PVR has partnered with Canadian motion technology player D-Box Technologies Inc. to design seats that sway and jerk in sync with the action on screen, offering a more immersive experience.

“Our strategy is to ensure we stay relevant in this age where every other day a new streaming service is being launched,” Gianchandani said. “Fortunately, customers are receptive.”

PVR’s business, which was hit by the cricket world cup in the April-June quarter, has revived since then, Gianchandani said.

Footfalls, which rose about 20 per cent in the quarter, will “remain strong,” though the economic slowdown may hurt advertising, according to a report by Edelweiss Securities Ltd. in August.

PVR is trading at an estimated price-to-earnings of 43.3 times, compared with about 21 for China’s Wanda Film Holding Co.

“It is not just the content. There is something else at play that is aiding the film business,” Gianchandani said. “I won’t say we are happy with the slowdown, but we have no complaints because the business is doing well.”