Pathan alone cannot save PVR’s fortunes

In a post-merger interaction with analysts and investors of PVR-Inox on Tuesday, the management said it has successfully completed all formalities related to the merger. The focus has now shifted towards synergistic benefits. The management highlighted that in terms of revenue synergies, F&B (food and beverage) will be a key focus area along with advertising revenue. Also, the average ticket price ratio per capita expenditure is lower than the global average and thus has the potential to grow here. On the cost front, it will focus on supply chain synergies and overhead rationalisation. Management has guided for potential annualized EBITDA synergy benefits 225 crores in the next 12-24 months. PVR-Inox plans to add 180-200 screens per year over the next two years, of which around 40% will be in South India.

But beyond synergy, improving viewership and occupancy rates are paramount. “The stock performance of PVR-INOX depends on where the occupancy (FY 2019/23E: 32.5%/25.5%) stands—150-250 basis points (bps) increase in occupancy compared to pre-pandemic levels. )’s fall is manageable, but a 400bps+ fall will weigh on return ratios and valuations, analysts at Kotak Institutional Equities said in a report on March 10.

Improved content performance will be a key driver of the businesses and will be a factor that investors will be watching closely. After a long break, the Shah Rukh Khan and Deepika Padukone starrer, Pathan, has started the ball rolling for the box office collections. It is heartening to note that post Covid multiplexes have faced immense pressure in their business.

However, the problem is that the performance of other films has been sluggish during the March quarter. “Except for the current quarter (Q4FY23) Pathan it’s over 500 crore, most Bollywood films haven’t done well, said Jinesh Joshi, analyst at Prabhudas Lilladher. prince And selfie, but amazingly You are a liar, I am a liar getting good feedback and may be infringing 100 crore in collections,” he said.

Against this backdrop, given that businesses are critical to profitability, the merged company will need more films that like Pathan, To be sure, the content in the film pipeline for 2023 looks promising. Bollywood movies with big star cast like young, stingy, Bhola And someone’s brother someone’s life To be released this year.

“The strong content pipeline for 2023 makes us build for a healthy recovery in footfall for FY24 and beyond,” said analysts at IIFL Securities. Nevertheless, predicting consumer behavior poses a challenge. The bar for material quality. Analysts at IIFL said, “While we are positive on the exhibition industry, changing content preferences have resulted in higher volatility in box office performance.” To this extent, it has made it difficult to predict earnings in the near future.

No doubt, the merger strengthens the company’s position as a leading multiplex with no substantial competition. “Given their size and scale, and with the paucity of single screens, the pricing power for PVRs will get better. But so far, the weak performance of Bollywood films remains a concern.”