EUR 120.00 For Business Accounts Only

MOSL : PVR: Weak content slate affects performance

.  PVR: Weak content slate affects performance

(PVRL IN, Mkt Cap USD1.3b, CMP INR1688, TP INR1675, 1% Downside, Neutral)

• Recovering from the COVID-19 woes last quarter, PVR net income again turned negative to INR568m, pulled down by 39% QoQ fall in admits. While management attributed it to weak content slate, but the same movies are racking good viewership on OTT.
• The company indicated that a good content pipeline will provide for a healthy recovery from 3QFY23. This, along with 110-125 screen addition target for FY23, should support revenue growth. Box office collections have seen a mixed bag, raising concerns around OTT. We reiterate our Neutral rating with a TP of INR1,675.

Revenue down 33% v/s pre-covid (2QFY20) on lower footfalls

• PVR’s 2QFY23 revenue declined 32% QoQ to INR6.6b (in-line, 33% below normalized base of 2QFY20) adversely impacted by lower footfalls.
• Occupancies declined to 23.7% v/s 33.1% in 1QFY23. Subsequently, admits at 18m declined 39%/28% v/s QoQ/precovid. Adversely impacted by lower footfalls, Average Ticket Price (ATP) and Spend per Head (SPH) declined 10.4%/4% QoQ (11%/30% above pre-covid levels).
• EBITDA (pre IND-AS116) turned negative with operating loss of INR337m (v/s INR66m profit est).
• Consequently, net income again turned negative with net loss of INR568m vs INR684m/INR1013m on QoQ/pre-covid (v/s INR608 loss est).
• Net debt as on Sep’22 stood at INR11b (INR9.3b in Mar’22)
• OCF for 1HFY23 improved to INR3.1b v/s negative cash flow of INR1.5b in 1HFY22, majorly on account of improved profitability position. FCF for 1HFY23 stood at INR1.5b on accounted of accelerated capex as the company looks to expand its footprint.

Highlights from the management commentary

• Pricing: Will be open to pricing actions to drive footfalls but will ensure it does not dilute the brand.
• Expect recovery in 3QFY23: The company expects healthy recovery in Q3FY23, on the back of positive response seen in early part of the quarter and strong release pipeline of big ticket movies.
• Advertising revenues: Recovery is expected to remain at 60-62% in 3QFY23 with recovery being stronger in 4QFY23 on exit basis.
• Subscription program: Commenced the “Passport Service” program across three cities on pilot basis. Will look to expand it based on the response received.