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

Inox rallied 6% to Rs 399 after the company said it has commenced the commercial operations of four additional screens in the-existing cinema theatre in Indore.

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.

Analysts at ICICI Securities continue to maintain positive stance on the multiplex stocks. "We continue to believe that the multiplex industry is the best placed media segment for growth driven by traction in content performance. Both PVR and Inox remain key beneficiaries of a flourishing multiplex business, which is one of the proxies on rising urban discretionary consumption spends," the brokerage said in a report dated December 30. 

The brokerage values PVR at 14.5x FY21E EV/EBITDA and arrives at a target price of Rs 2,200 with a BUY rating. It values Inox at 10x FY21E EV/EBITDA (nearly 30 per cent discount to target EV/EBITDA multiple of PVR) to arrive at a target price of  Rs 465/share and maintain BUY rating.

“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 a report published in November.

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.