Ad income returns but occupancy remains muted, as expected
PVR Inox’s ad revenue grew ~36% QoQ to ~INR 1.48bn (highest quarterly ad-income post Covid) in Q3FY25, which in our view is an encouraging development. However, sustainability of ad revenue is contingent on recovery of content pipeline. While Hollywood pipeline looks better in CY25 compared to what we saw over the last 2 years, there is still limited visibility of Hindi content. Also, asset monetisation plan, which could have materially improved EBITDA to PAT conversion, is unlikely to materialise in near term. Therefore, we have cut PAT by 38.3%/21.0% for FY26/27E and TP to INR 1,860 (17.3%). We believe the stock is presently undervalued and steps taken by the management such as moving towards a more capital-efficient model may re-rate the stock in medium term. Maintain BUY.
Q3FY25 performance review
Revenue was INR 17.2bn (up 5.9% QoQ/11.1% YoY), in line with our estimate. Adjusted EBITDA was INR 2.4bn, up 26.6% QoQ/ 16.9% YoY. Net profit was INR 355mn. Ticketing revenue grew 5.0% QoQ/5.8% YoY to INR 8.7bn. F&B revenue grew 9.4% YoY (flattish QoQ) to INR 5.2bn. Ad revenue grew 36.0% QoQ/5.7% YoY to INR 1.5bn. Admits declined 3.9% QoQ/up 2.2% YoY to 37.3mn in Q3FY25. Occupancy remained sequentially flattish at 25.7%. Average ticket price grew to INR 281 (up 9.3% QoQ/3.7% QoQ) and F&B spend per head was INR 140 (up 2.9% QoQ/6.1% YoY).
Management commentary
Management attributed lower occupancy levels in 9MFY25 to a decline in film releases from both Hollywood and Bollywood, as well as the absence of major blockbusters in the Hindi film industry. However, Dec’24 recorded the highest occupancy, exceeding 30%. ‘Pushpa 2’ contributed ~36% of Q3 India box office occupancy. Re-releases accounted for over 4% of total footfall. Looking ahead, management expects Hollywood to rebound strongly in 2025, driven by a lineup of major franchise sequels. It remains optimistic that consumption patterns will improve, supported by tax benefits and an enhanced content pipeline.
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