Shares of multiplex operator PVR (PVR INOX) saw a daily gain on Oct 07. The stock jumped more than 7 percent. CLSA has set a target price of ₹2,135 on the stock, which is about 57% higher than the current market price. CLSA’s positive outlook is based on increased cinema attendance, higher spend per customer and stronger operating leverage to increase margins.
PVR INOX performed well in the first quarter, with an 8% increase in viewership (admissions) year-on-year. Revenue from movie tickets grew by 15%, while revenue from food and beverage (F&B) increased by 13%. EBITDA (earnings before interest, tax, depreciation and amortization) increased by 33% during the quarter.
CLSA said, the simultaneous improvement in viewership and cost per customer is a sign of recovery in consumer demand. Brokerage to PVR INOX "An Attractive Bet on Discretionary Consumption (Opportunity Spending) in India" Counted Multiplexes have become an important medium of outdoor entertainment and around 1,500 films are released in India every year, he said.
Increasing margins is also an important focus for the company. PVR INOX is taking measures to control utility, manpower, rental and F&B costs. Also optimizing the range of food and beverage items to increase consumer spending.
CLSA hopes that these initiatives and increasing occupancy levels will help improve profitability. CLSA also said adding new screens and tie-up with real estate developers to build more theaters are also positive for the entertainment company.
Notably, earlier JM Financial also maintained its ‘Add’ rating and target price of ₹1,270 for this stock. A domestic brokerage firm said, "Management had indicated that investment for growth would remain a priority, while capital-return options were also being considered. Capex guidance for FY27 has been reduced to ₹350 crore given good momentum in asset-light and FOCO models."
He further said that, "This announcement is an important stage in terms of capital-return. We are raising our target EV/EBITDA (pre-IndAS) multiple to 9x from 8x and target price to ₹1,270 from ₹1,130 given the good content pipeline. ‘ADD’ rating maintained."
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