One hit doesn't make a quarter, but hold PVR, Inox

ET Intelligence Group: Mulitplexes are likely to have a weak December quarter despite the success of Aamir Khan-starrer Dangal. Besides demonetisation, which impacted a quarter of the sector's revenue in the form of food & beverages (F&B), the box office collection fell by 6% year-on-year as the performance of most movies released during the quarter was not up to the mark.

According to Bloomberg's consensus estimates, revenues of PVR and Inox Leisure are expected to show a meagre YoY growth of 6-13% for the December quarter.

Historically, the December quarter is considered to be a big revenue booster given the festive season.However, this time around, box office collections of majority of movies released in the quarter, including Ae Dil Hai Mushkil, Befikre, Dear Zindagi, Force 2, Kahaani 2, Rock On 2, Shivaay, and Mirzyawas, were below expectations.


The exception was Dangal, which collected Rs 350 crore. This, however, may not make up for the shortfall of other movies. According to a research by Edelweiss Securities, collections in the quarter fell by 8.8% YoY to Rs 816.4 crore.

Demonetisation, too, dampened the business during the quarter. Though online ticket sales picked up, multiplexes were not able to raise ticket prices. Also, F&B segment is expected to see weak business.

Investors, however, should continue to hold on to multiplex stocks given the impressive line-up of films in the March quarter. Films such as Badrinath Ki Dulhaniya, Jolly LLB 2, Kaabil, OK Jaanu, Passengers (3D), Raaes, Rangoon, Sarkaar 3, and Wolverine 2 (3D) are likely to generate higher footfalls. Also, as availability of cash improves, consumer spending may gradually return to normal.

On the valuation front, the enterprise values of PVR and Inox are 12.4x and 8.9x FY18 projected EBITDA, respectively -lower than three-year averages of 13.4x and 11x, respectively.