A different take on PVR’s prospects from top down perspective. I am not invested in PVR stock or have any opinion about it. But I like tracking this stock given that I am a movie buff.
PVR’s revenue consists of 50% in movie tickets, 30% F&B and rest miscellaneous (advertising etc). At first glance it may seem that they have diversified revenue stream but it’s all actually driven from single factor- customer footfall. So if a movie is flop they will lose revenue in all these categories.
Their current topline is 6000 crores so for them to grow at even 15% rate, they need to be pulling in around 900 crores next year, roughly 1000 crores year after and so on. PVR-INOX combined accounts for 40% of total screen revenue in India, so the total market also needs to grow by 2000 crores next year, 2300 crores next year and so on. Which means there has to be at least 4-5 massive blockbusters every year to generate that kind of total market revenue.
Stock did well last quarter because we had some mega hits in the form of Jawaan, Pathan and Salaar, each doing 500-600 crores business in india. But this quarter has been quite lackluster so far with none of the big releases (e.g. Fighter) bringing solid ticket sales in india. So clearly market is waiting for another spate of blockbusters.
In addition, PVR’s presence in South is mostly limited to Karnataka with small market share in Tamil Nadu and Andhra Pradesh, which have produced most of the blockbusters. Also competition there from single theaters is quite tough there and regulations there prevent PVR from taking price hikes.
I believe this is what makes taking any long term call on PVR so difficult. They have absolutely no control over the quality or quantity of the products they are distributing while carrying a high fixed cost. The fact that these days all the blockbusters are available on OTT within 2-3 weeks of their releases is also a dampener.
So 2-3 mega hits are what PVR stock needs right now to trigger a fresh rally.
