The September quarter (Q2FY23) was a miserable one for multiplex companies PVR Ltd and Inox Leisure Ltd. A few months back, multiplexes were feeling the heat of the boycott-Bollywood trend on social media as audiences rejected bad film content. Concerns have risen over the growing competition from over-the-top (OTT) platforms.
Given this, there is hope to shed some light on whether there has been a meaningful change in consumer behavior since Q3. The trends so far in the third quarter are encouraging with material performance returning well in October and November.
As per MK Global Financial Services Ltd calculations, the quarter-to-date box office collections for Q3 have already surpassed the previous quarter’s collections, with some big films still set to release in December.
In other words, the stage is set for better financial performance in the third quarter. Jinesh Joshi, an analyst at Prabhudas Lilladher, said, “The December quarter was anyway expected to be better than the festive season.” So far, regional film content has done well. Got good response.
“Further, with the clock on the top of Drishyam 2 150 crores so far and with Avatar: The Way of Water set to release on December 16, Q3FY23 is expected to be a good quarter for PVR and Inox Leisure,” said Joshi. As of now, expectations are high from Avatar.
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Against this backdrop, occupancy levels at PVR and INOX are expected to improve in Q3. Nevertheless, investors should watch to see if the material’s performance sustains the momentum. This is paramount and this is where the quality of the content becomes crucial to attract the audience to the movie theaters continuously. MK believes that the inflationary landscape and higher ticket prices have raised the cost of movie watching, leading to increased content-quality filtration by patrons. “As a result, footfall has been lower than pre-Covid levels. “The underlying share price of the exhibitors is also tracking the box office performance,” Emkay analysts said in a report on November 29.
Shares of PVR and Inox are down 14% and 10%, respectively, from their 52-week highs seen in August. Apart from better footfall and occupancy, a key catalyst for the shares is the pending proposed merger of the two companies, which is expected to yield synergistic benefits. Continued improvement in box office collections and better-than-expected synergy gains post merger could lead to a re-rating.
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