In the aftermath of the much-anticipated PVR Inox merger, the collective gaze of investors and industry analysts is fixed on the unexpected turn of events following the release of the first-quarter results.
The once-promising union in the Indian cinema industry has encountered a notable setback, reflected in a dip in PVR Inox shares in FY24. Analysts, notably Motilal Oswal Securities, attribute this decline to a fourth-quarter movie underperformance, translating into reduced occupancy and margins.
Is that all?
Not really… There is a greater story piling in the background of the post PVR Inox merger. So, let’s explore the whole scenario to understand the PVR stock performance after the merger!
(A) When did PVR and Inox Merge and why?
PVR and INOX merged in March 2022 to create the largest multiplex chain in the country. The merger was announced in June 2022 and received approvals from the NSE and BSE. The record date for share allotment to INOX shareholders was announced in February 2023. This merger has resulted in PVR-INOX having a combined total of 1,546 screens across 109 cities, making them a formidable force in the multiplex industry.
(B) Q1 Analysis: How is Stock Performance after the PVR Inox Merger?
Go through the following table to get a brief idea about the scenario-
|Stock Performance||May 2023: PVR Inox shares fell 4.12%, hitting Rs.1,404 on BSE. Despite revenue and EBITDA exceeding estimates, Q4 reported a loss of Rs.333 crore.|
|Pre-Conference Queries||Nuvama Institutional Equities inquired about ad revenue return, occupancy for higher pricing, and proactive measures to address movie underperformance.|
|Brokerage Insights||Despite losses, one brokerage stayed positive, citing strong revenue, EBITDA, FY24 expansion plans, and an optimistic movie lineup.|
|Motilal Oswal Analysis||Movie underperformance led to lower occupancy; PVR Inox’s disclosed financials showed a 290 bps YoY decline, with an estimated 70% YoY EBITDA decline.|
|Quarterly Dynamics||Strong January starts with hits like ‘Pathaan’ and ‘Avatar,’ but admissions dipped in February and March due to lackluster Hindi films. Anticipation grew for conference call insights.|
|Takeaway||Ongoing narrative prompts a closer look at factors shaping PVR Inox’s post-merger stock performance, emphasizing challenges and opportunities in the cinema landscape.|
Unraveling the Plot: A Comprehensive Narrative Dive on Post PVR Inox Merger
So, in May 2023, PVR Inox went through a bit of a rollercoaster – their shares dropped by 4.12%, reaching Rs.1,404 on the BSE. Even though the money stuff (revenue and EBITDA) was doing better than experts thought, there was a hitch – the company reported a loss of Rs.333 crore for the March quarter.
Before the big conference call, Nuvama Institutional Equities had some burning questions. They wanted to know when ad revenue would bounce back to pre-Covid levels and at what point PVR Inox felt confident enough to jack up their prices. Plus, they were curious about what the company was doing to fix the recent movie hiccups.
Now, the financial gurus from different brokerages chimed in. One of them said, “The money and profit stuff was better than we thought, but PVR Inox still reported a loss of Rs 330 crore.” Despite the challenges, they kept their spirits high, talking about plans to grow in FY24 and a positive outlook on movies.
Motilal Oswal Analysis
Motilal Oswal Securities had its take. They figured the lower occupancy and margins were because movies weren’t performing as expected. Also, they pointed out that PVR Inox spilled the beans only about the merged company’s money matters. The occupancy took a dip by 290 bps YoY to 22.2%, and they guessed a 70% YoY dip in some money thing called pre-Ind-AS Ebitda, with a 5.1% margin.
Now, the movie scene – ‘Pathaan’ and ‘Avatar’ started the quarter with a bang, but things got a bit slow in February and March, thanks to some not-so-great Hindi films. And oh, the financial details spilled so far only covered the merged company, making everyone super curious about what’s coming in the conference call.
So, while everyone was waiting for the big conference call, the story kept getting more interesting. People were diving deeper into what made PVR’s stocks do the limbo after the merger. The twists and turns of the quarter and the smart moves by PVR Inox were like the plot of a blockbuster movie, showing us the challenges and cool opportunities in cinema.
(C) Q2 Analysis: PVR Stock Performance Post PVR Inox Merger
In this section we will analyze the stock performance of PVR post PVR Inox merger by breaking it into two parts, namely- Performance Overview and Financial Outlook.
Here we go!
(C.1) Performance Overview
|Blockbuster Performance in Q2 FY’24||PVR Inox delivered a stellar performance in the quarter ending September, marked by increased footfalls and enhanced occupancy.|
|Hindi Box Office Triumphs||Record-breaking performances of Hindi films ‘Jawan’ and ‘Gadar 2,’ ranking among the highest-grossing of all time, contribute significantly to the overall Q2 success.|
|Mid-Budget Movie Contributions||Releases like ‘Rocky aur Rani ki Prem Kahani,’ ‘Oh my God 2,’ ‘Dream Girl 2,’ and ‘Fukrey 3’ contribute reasonably to the quarter’s success.|
|Global and Regional Movie Impact||Hollywood releases (‘Oppenheimer’ and ‘Mission Impossible: Dead Reckoning Part 1’) and the Tamil film ‘Jailer’ featuring Rajinikanth make notable contributions.|
|Remarkable Financial Metrics||PVR Inox achieved its highest-ever average ticket price (ATP) at ₹276 in the September quarter. F&B spending per head reaches ₹136, contributing to a remarkable 64% YoY increase in footfalls.|
(C.2) Financials and Outlook
|Analyst’s Verdict||Industry analyst Jinesh Joshi hails it as the “Best-ever quarter for PVR Inox,” reflecting the remarkable performance.|
|Financial Fortitude||EBITDA surges to ₹706.8 crore, compared to ₹353 crore sequentially. The EBITDA margin sees a substantial 830 bps increase, soaring from 27% to 35.3%.|
|Net Profit and Revenue Surge||PVR Inox achieved a net profit of ₹166.3 crore for Q2 FY24, rebounding from a ₹82 crore loss in Q1. The company’s Q2 revenue sees an impressive 53.3% surge.|
|Content-Centric Success||Content remains the driving force behind PVR Inox’s consistent success. Analysts anticipate a sustained occupancy level in 3QFY24, highlighting a robust content pipeline.|
|Outlook and Future Content Pipeline||Analysts express optimism due to a healthy content pipeline, anticipating movies like ‘Animal,’ ‘Tiger-3,’ ‘Dunki,’ ‘Salaar,’ and ‘Leo.’|
|Strengthened Financial Position||Post a robust Q2FY24, PVR Inox witnesses improved balance sheet strength with a net debt reduction of Rs327.6 crore. The company aims for Free Cash Flow positivity in FY24.|
|Synergy Benefits from Merger||Synergy benefits from the PVR Inox merger begin to materialize in the first half of FY24, with reported EBITDA synergy benefits of ₹124 crore to ₹143 crore.|
|Delayed Ad-Revenue Recovery||Ad-revenue recovery faces delays, but synergy benefits from the merger start to boost EBITDA, according to Joshi.|
(D) PVR Inox Financials: Post-Merger Operational Efficiencies, EBITDA Synergy at ₹124-143 Cr in H1
PVR Inox Ltd, in its Q2 FY’24 results announcement, underscored the positive impact of merger synergies, showcasing operational benefits achieved in the first half of the financial year. Let’s see what it said-
|Operational Efficiencies and EBITDA Synergies||Reported EBITDA synergy benefits of ₹124-143 crore, emphasizing seamless integration and substantial efficiencies.|
|Overhead Cost Savings||Notable savings of ₹17-21 crore in personnel, housekeeping, and security costs during the first half of FY24.|
|Screen-wise Financial Gains||Per-screen savings range from ₹1,04,000 to ₹1,28,000 during H1 FY24, with an average screen count of 1,656.|
|Box Office and F&B Synergy Benefits||Detailed insights into Box Office and F&B EBITDA synergy benefits, totaling ₹75-84 crore and ₹31-38 crore, respectively, in H1 FY24.|
|Financial Analyst’s Perspective||Jinesh Joshi from Prabhudas Lilladher praises encouraging synergy benefits, citing strong Q2 performance and impressive operations.|
|Financial Performance Overview||Q2 FY24 sees a significant net profit of ₹166.3 crore, a marked improvement from the ₹82 crore loss in Q1.|
|Continued Growth Momentum||PVR Inox opened 37 new screens in Q2 and 68 screens in H1 FY’24, focusing on profitable expansion.|
|Market Outlook and Ratings||Indian Ratings maintains a positive outlook, anticipating EBITDA recovery and emphasizing the merged entity’s market dominance.|
|Stock Market Reaction||Despite robust earnings, PVR Inox’s stock closed 1.76% lower at ₹1,742 on the BSE, reflecting post-announcement market dynamics.|
Note: Recently, PVR and Inox challenged OTT services with a monthly pass for unlimited movies at ₹699. Sounds interesting. Isn’t it? For more details, visit the article “Monthly pass for movies by PVR and Inox.”
(E) Overall Stock Performance After PVR Inox Merger
The performance of PVR stock after the PVR Inox merger has been mixed. While there have been some positive movements, there have also been instances of negative price fluctuations.
One example of a positive movement is when PVR INOX shares rose over 3% despite posting a loss of ₹82 crore in Q1. This shows that despite the financial setback, investors still showed confidence in the merged entity.
On the other hand, there have been instances where the stock price has fallen. For instance, PVR Inox share prices were down almost 3% on a particular day, despite strong occupancy and positive Q2 results. The market reaction to these results resulted in a decline in share prices.
It is important to note that stock performance can be influenced by various factors including market sentiment, financial performance, and investor expectations. Therefore, investors must analyze multiple factors and consider a long-term perspective when assessing the performance of a stock post-merger.
It’s worth noting that the merger between PVR and Inox has created a multiplex giant, combining the strengths and resources of both companies. This consolidation has the potential to bring about synergies and create value in the long run.
(F) Summing up PVR Stock Performance Post PVR Inox Merger
As you delved into how PVR Inox fared post-merger, you discovered a blend of hurdles and triumphs. Initially, there were struggles, with the company’s shares experiencing a decline. However, a closer examination revealed fluctuations in both the first and second quarters.
Despite facing challenges, the PVR Inox merger had a strategic plan, emphasizing quality movies and leveraging the benefits of the merger. It resembled a cinematic journey where, despite initial difficulties, the protagonist—in this case, PVR Inox—found ways to navigate challenges.
Keep an eye on how this storyline unfolded for the cinema company in the past!