After a long wait, multiplex companies PVR Ltd and Inox Leisure Ltd reported decent earnings for the quarter ended December 31, 2021. Since the outbreak of Covid-19, both the companies have suffered heavy losses as restrictions on multiplexes were eased.
Operating metrics turned positive in the third quarter after several quarters. Adjusted for Ind-AS effect, the consolidated Ebitda (earnings before interest, taxes, depreciation and amortization) of PVR stood at 66.2 crores. With this, PVR has stopped burning cash after six quarters. Similarly, Inox Leisure saw an Ind AS Adjusted Consolidated Ebitda of Rs. 54 crore in Q3.
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The easing of mobility restrictions and the increasing pace of vaccination led to an increase in the number of people. In addition, good film content from Bollywood, regional and Hollywood films helped. Strong box office collections from big budget films favored the return of multiplex companies.
The Q3 earnings conference call indicates that management expects a rapid demand revival given the materials pipeline. According to PVR, while many big-ticket films are delaying releases due to the third Covid wave, the recovery is expected to be quick due to a strong film pipeline in the next 12 months. Inox’s management expects the release to resume largely from the first week of March.
However, analysts remain cautious in the short term, despite management’s upbeat outlook. “Q4 will be a tough quarter for these companies considering the volatility in the situation due to Covid. While the film pipeline (Jersey, RRR, and Radhe Shyam) is strong, it is difficult to predict whether these films will release in the fourth quarter or go ahead,” said Jinesh Joshi, research analyst at Prabhudas Lilladher. The momentum from Q1FY23, assuming By then the fear of Kovid is over,” he said.
Analysts at Elara Securities (India) Pvt Ltd said, “We expect profitability to be around 20% in FY13 due to low footfall (footfall of small/medium budget films may revive in H2FY23) and low But if the pandemic ends, we expect strong growth in FY24 as structural material trends remain strong,” he said in a report.
As such, Q4 revenue may be impacted as occupancy is expected to remain low. Here, investors will track how quickly the footfall recovers to pre-pandemic levels, which is crucial for earnings. “While these stocks may respond positively on Monday, a meaningful bounce may take time,” an analyst at a domestic brokerage house said on the condition of anonymity. As things stand, shares of PVR and Inox Leisure are down 23-26% from their respective priors. -Covid high seen in early 2020.
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