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Solid content pipeline, higher ad revenue: Nuvama's bullish bet on PVR Inox

Brokerage remains upbeat as analysts foresee several growth catalysts, including a promising Hollywood slate, anticipated recovery in high-margin ad revenues, & company's commitment to reducing debt

Inox, PVR Inox

Photo: Bloomberg

Tanmay Tiwary New Delhi

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Nuvama bullish on PVR Inox: Following a subdued period in April and May this year due to a lull content schedule and concurrent events like general elections, PVR Inox is set to bounce back on the back of strong content lineup in the upcoming months, analysts said.

Domestic brokerage Nuvama Institutional Equities (Nuvama) analysts anticipate strong performances driven by ‘Kalki 2898 AD,’ which is expected to rake in a gross collection of approximately Rs 100 crore on its opening day this Thursday, June 27. Meanwhile, ‘Munjya,’ has already crossed Rs 100 crore in gross collection so far in June, as per reports. 

That apart, the brokerage remains upbeat as analysts foresee several growth catalysts, including a promising Hollywood slate, anticipated recovery in high-margin ad revenues, and the company's steadfast commitment to reducing net debt (amounting to Rs 136.7 crore in FY24).

Considering these factors, analysts have reiterated their 'Buy' recommendation with a target price set at Rs 1,995 (upside of 39 per cent), based on a valuation of 12x FY26E enterprise value/ earnings before interest, taxes, depreciation and amortisation (EV/Ebitda). 

Meanwhile, here are top factors why Nuvama is betting on PVR Inox:

Rising Ad revenues

In FY24, PVR Inox saw a considerable 18 per cent year-on-year (Y-o-Y) increase in ad revenues at Rs 1958.4 crore. Projections from IPG Mediabrands Magna Global Advertisement forecast a further 11.8 per cent growth in the Indian advertisement market in 2024, driven by improving economic conditions and increased FMCG sector consumption. 

This trend, analysts believe, is likely to benefit cinema advertising, particularly PVR Inox, which secures 30–35 per cent of its ad revenues through long-term deals with advertisers.

Debt reduction and capital efficiency

Management's strategic focus includes achieving a net debt-free status in the coming years, analysts highlighted. The company is further exploring avenues such as monetising real estate assets valued around Rs 300–400 crore.

PVR Inox, analysts at Nuvama believe, aims to reduce annual capital expenditure by 20 per cent via alternative models like Franchisee-owned, Company-operated (FOCO) partnerships with developers, signalling a shift towards a capital-light operational model.

Strong content pipeline
 
The upcoming release of ‘Kalki 2898 AD, featuring stars like Prabhas, Amitabh Bachchan, and Deepika Padukone is anticipated to be a blockbuster, Nuvama said in a note. It has already generated a major buzz globally, including record-breaking $2.6 million in pre-sales in the USA. 

The film's strong marketing initiatives and promising early ticket sales in India, analysts said, underline its potential success.

Revival of Hollywood releases
 
Following the resolution of last year's writers' strike, Hollywood's content pipeline is set to improve. Upcoming releases like ‘Deadpool & Wolverine’ with Ryan Reynolds and Hugh Jackman, scheduled for July 26, and ‘Transformers One’ featuring Scarlett Johansson and Chris Hemsworth, slated for September 20, are expected to bolster PVR Inox's offerings and attract diverse audiences, Nuvama added.

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First Published: Jun 25 2024 | 8:51 AM IST

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