Target: ₹2,657
CMP: €1,372.60
The merger of PVR Ltd and Inox Leisure to form PVR Inox Ltd (PVR) was undertaken to overcome the post-Covid disruption and address the challenges of OTT platforms. Because the content of the film/exhibition did not resonate with the audience, occupancy reached an all-time low, impacting overall financial performance.
To offset the impact of this new challenge, PVR undertook a major business model makeover, from a COCO-FOCO setup to predominantly FOCO & O&M formats that are asset-light and help improve breakeven/profitability to improve.
After carrying out the restructuring, the current number of screens is 1,700. We expect the number of screens to increase and reach 1,900 by FY27 (total capex of ₹400-450 crore). We believe that content creators are responding by capitalizing on changing audience tastes and the recent successes of films such as Stree-2, Pushpa-2etc. suggest green shoes regarding occupations. In our opinion, the worst is over for the sector and we are initiating a contranium Buy call on PVR.
We initiate coverage on the shares at a price target of ₹2,657 (4.4x FY 27 EV/EBITDA over the next 24 months). Our model assumptions indicate a significant margin of safety.
