Content is King? PVR Inox's Q2 Performance Sparks Hope for Investors Amid a Muted 2024

PVR Inox Results: Losses continue to dominate the quarterly earnings report of the company. In Q2FY25, PVR Inox reported a loss of Rs 11.8 crore, down from a profit of Rs 166.3 crore recorded during the same quarter last year. While the company's revenue fell by more than 19 per cent, it did see a quarter-on-quarter surge of 36.2 per cent.

However, analysts seem to have an optimistic outlook for India's leading multiplex chain as brokerages bet on a strong lineup of content. During the recent earnings call, the company's management stated that the "excitement level" among movie-goers is back to where it was before the pandemic. The entry of high-quality content was one of the key drivers of cinema attendance.

This was quite evident by the strong performance of both new and old movie re-releases.

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The first half of CY24 witnessed a rather dull period primarily owing to the lower number of releases in both domestic and international cinema. The absence of big-budget films alongside multiple movies hitting theatres the same day (thus eating into each other's budget) also contributed to the dull momentum, as per a report by Emkay Global.

While Stree 2 collections remained a game-changer in the earlier quarter, the upcoming pipeline for Q3 also seems strong with movies like Bhool Bhulaiyaa 3, Singham Again, Chaava, Baby John, Venom 3 and Pushpa 2 hitting the cinemas.

On top of this, the company is also planning to diversify beyond its core revenue generator segment. As per an exchange filing, the company is all set to enter the food and beverage space and will be opening its first food court in December this year. The diversification plan in this space will be carried out via partnership with Devyani International which owns well-known fast food chains like Pizza Hut, KFC and Costa Coffee in India.

While the company still faces some hurdles in boosting its profits, analysts remain optimistic about the company's future prospects. Many brokerages, including ICICI Securities, have maintained a buy rating on the stock.

Worst Behind for PVR Inox?

PVR Inox saw its revenue drop to Rs 1,622 crore this quarter, marking a significant drop from Rs 2,000 crore recorded in the same period last year. But analysts are hopeful for a turnaround next quarter largely owing to the structural initiatives by the management.

The company has been cutting down on loss-making screens and rolling out new strategies to bring in more money—like special offers on tickets and food, screening of alternative content and introducing a movie pass to get more people back in theatres. The multiplex chain is also transitioning to a more capital-light model, wherein PVR Inox will jointly partner with developers to invest in new screen capex, Emkay Global mentioned in a report released earlier this month.

"All these initiatives are aimed at driving higher footfalls to theaters, while also redistributing the risk with mall developers. However, the impact of these cost initiatives is only likely to be visible a few years from now, in our view," the brokerage house said.

PVR has also adopted the FOCO (Franchise Owned, Company Operated) model, which is expected to boost return ratios and offer some protection when content underperforms in certain months.

"We believe the worst may be over for PVR Inox in terms of Hindi content, which may only improve going ahead on due to fresh concept-driven films, VFX-led films and franchise-based films. We continue to believe that good comeback by the Hindi/English genre is a key monitorable for higher profitability," Elara Securities stated in its report.

By FY26, the company plans to open 80-120 new screens. Of these, 15 per cent will follow the FOCO model, 35-50 per cent will use an asset-light approach and the remainder will be through structured lease agreements.

On year-to-date basis, the shares of the multiplex chain have largely remained in the red territory. However, during the past 6 months, PVR Inox shares have delivered returns of over 15 per cent on the National Stock Exchange.

As for now, it looks like PVR Inox has weathered the storm. While quality content does seem to work out well for the multiplex chain, the same could turn into a big gamble if the next batch of movies fail to impress cinema lovers and drive overall footfall.