PL Stock Report: PVR Inox (PVRINOX IN) - Q2FY24 Result Update – Best ever quarter - BUY

PVR Inox (PVRINOX IN) - Jinesh Joshi - Research Analyst, Prabhudas Lilladher Pvt Ltd.

Rating: BUY | CMP: Rs1,745 | TP: Rs1,984

Q2FY24 Result Update – Best ever quarter

Quick Pointers:

• PVR-Inox reports best ever quarterly performance with pre-IND AS EBITDA margin of 21.4%.
• ATP/SPH was highest ever at Rs276/Rs136 with an occupancy of 32.3%.

In a blockbuster quarter, PVR-Inox reported better than expected performance with footfalls of 48.4mn (PLe 47mn) and pre-IND AS EBITDA margin of 21.4% (PLe 19.2%). Though ad-revenue recovery is delayed, synergy benefits from the merger have started playing out thereby boosting EBITDA by Rs1,240mn to Rs1,430mn in 1HFY24. Following strong performance in 2QFY24, PVR-Inox’s BS strength has improved with net debt reduction of Rs3,276mn and now the company is on track to be FCFF positive in FY24E. While the current quarter performance may be difficult to replicate content pipeline for near term is healthy with movies like Animal, Tiger-3, Dunki, Salaar, and Leo in pipeline. We expect footfalls of 157mn/172mn with pre-IND AS EBITDA margin of 16.3%/17.6% for FY24E/FY25E respectively. Retain ‘BUY’ on the stock with a TP of Rs1,984 (earlier Rs1,862) after assigning EV/EBITDA of 14x (earlier 14.5x) as we roll-forward to Sep-25E.

Proforma revenue up 88.6% YoY: Top-line increased 191.2% YoY to Rs19,999mn (PLe Rs18,944mn) due to consolidation impact with Inox Leisure. However, proforma revenue (assuming consolidation in base quarter) was up 88.6% YoY. Proforma footfalls were up 64.0% YoY to 48.4mn (PLe of 47mn). Proforma ATP/SPH was up 25%/15% YoY to Rs276/Rs136 respectively, while occupancy stood at 32.3%.

Pre Ind-AS EBITDA margin of 22.1%: Proforma pre Ind-AS EBITDA (including other income) increased to Rs4,473mn (PLe Rs3,895mn includes other income) with a margin of 22.1%. Pre-IND AS PAT stood at Rs2,073mn (PLe Rs1,691mn) versus proforma pre-IND AS loss of Rs784mn in 2QFY23.

Con-call highlights:

1) Net debt stood at Rs11,033mn in 1HFY24. Further, PVR-Inox aims to achieve net debt to EBITDA ratio of 1:1 for FY24E.

2) Advertising revenue is expected to breach pre-COVID levels in FY25E.

3) The recently launched monthly subscription “passport” (10 movies for Rs699) is limited to 20K users in Phase-1. The plan excludes Southern region which already has high occupancy.

4) Windowing gap for Bollywood and Hollywood movies is 8 weeks, while it is 4-6 weeks for Tamil and Telugu movies.

5) Convenience fee was down sequentially on per admit basis, as no minimum guarantee payment exists in the current contract.

6) Rent cost was up 26% YoY (proforma basis) due to (i) screen additions, (ii) routine escalation and (iii) higher payout to developers (some agreements are on revenue share basis)

7) Plans to open 160 new screens and exit 60 screens in FY24E.

8) 37 new screens were opened in 2QFY24.

9) Breakdown of EBITDA synergy of Rs1,240mn-1,430mn achieved in 1HFY24 is as follows: -

a) Rs750-840mn from NBOC b) Rs310-380mn from F&B and c) Rs170-210mn from overheads.