PVR Inox shares: After 'Gadar-2' & 'OMG-2', will 'Dream Girl-2' lead the rally?

Shares of PVR Inox have been rallying higher in the second quarter of the ongoing financial year (Q2FY24) as the multiplex operator has stood out as an outperformer on the Dalal Street on the back of various big-ticket and highly anticipate movies over the last few weeks, which have revived its dud fortunes.

The street and market participants continue to remain positive on the stock with a strong pipeline of some mega-star movies slated to be released in the last leg of the quarter. On Friday, August 25, Ayushmann Khurrana starrer 'Dream Girl-2' hits the silver screen with slew of positive reviews on social media.

Shares of PVR Inox have rallied about 30 per cent from its close at Rs 1,373 on August 30, 2023. The stock extended its gains to Rs 1,753.50 on Friday. The stock has surged more than 20 per cent in the last one month. The multiplex player commands a total market capitalization of more than Rs 17,000 crore. Experts, tracking the stock, continue to remain positive on the stock.

According to analysts, Q2FY24 had a strong start with movies like Mission Impossible-7, Oppenheimer and Barbie doing well at box office, followed by bollywood flix like Gadar-2, Oh My God-2 and Jailor, which stormed the box-office collections. So far, half a dozen movies have already breached the net box office collections of more than Rs 100 crore in the current quarter.
 

Q2FY24 might well turn out to be an exceptionally strong quarter, if not the best ever, said Jinesh Joshi from Prabhus Lilladher. He expects average ticket price (ATP) growth can be higher this quarter as Oppenheimer witnessed high demand in IMAX format and advertisement revenue is expected to register good performance given strong box off collections.

"Hollywood films have done well in the second quarter which should result in significant benefit for PVR-Inox as it has a higher presence in metro and tier-1 markets. Thus, overall, we expect 2QFY24 to register sharp improvement in performance," he said, retaining a 'buy' rating on the stock with a conservative target price of Rs 1,797.

Analysts also believe that it is not merely the success of Bollywood movies as the regional and Hollywood movies have also played a vital role in the renewed interest of the cinephile at theatres. Success of movies like Oppenheimer, Barbie, Jailer and Lost in the stars, suggest the  behavioral change in the content consumption.

Cinemas around the globe are witnessing a renaissance. A slew of blockbusters has pulled movie-goers back to theatres. But for the film exhibition business to thrive, blockbusters alone are not enough. We address three debates to figure if this is indeed a recovery. Box office collection analysts indicate distribution is reverting to pre-Covid levels – implying a return to normalcy, said JM Financial.

PVR-INOX is better placed today than ever before to ride the revival. Cost efficiencies and better ATP/SPH mean screen economics is viable even at structurally lower occupancies. Lack of inorganic expansion avenues, especially in single screen dominant south India, means PVR Inox's gross fixed assets/screen should stay in check, thus improving RoCE, it added with a 'buy' tag a target of Rs 2,270.

ICICI Securities has been bullish on the recovery of the movie exhibition business given the strong pipeline since Q2FY24. However, the current performance is a positive surprise. Merger synergies have also started playing out. Given the high operating leverage that plays out in this business, it believes earnings upgrades are necessary. It has a buy rating with a revised target price of Rs 2,240.

The latest box office collection has been at the highest and estimated to have grown with increase in occupancy levels in multiplexes due to supper hit realizes in last week from Sunny Deol starrer 'Gadar-2, Akshay Kumar-starrer OMG 2 and Rajinikanth-starrer Jailer’s reporting strong box office collections, said Prashanth Tapse, Senior VP Research at Mehta Equities.

Tapse further added that this would bring in a sharp turnaround in largest multiplex player PVR Inox, which had reported losses in the last two consecutive quarters. Going forward, focus would continue to remain optimistic looking at upcoming releases like Salaar, Dream Girl-2 and Jawan which could add more net box office collections in Q2FY24.

"We expect Q2 earnings would surprise the street based on healthy box office collections. Technically, PVR Inox is in the positive zone with support near Rs 1,700 level and resistance near Rs 1,780-1800 levels. Hence traders can continue to hold an optimistic outlook in this counter," he said.

Among other brokerage firms, Nuvama Institutional Equities gave PVR Inox a 'buy' rating with a target price of Rs 2,080 apiece, while ShareKhan also had a similar rating on the stock with a target price of Rs 1,780, which is already met. Kotak Institutional Equities pegs the stock at Rs 1,600 with an 'add' tag.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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