PVR Cinemas failure due to weak outputs from Bollywood

PVR Limited (PVR) is India’s largest and most premium film exhibition company. It has pioneered the multiplex revolution in India by establishing the first multiplex cinema in 1997 at New Delhi and the company continues to be the market leader with the supreme aim on innovation and operational excellence in order to excel the big‑screen movie experience.

Company’s Highlights

Hindi films have been on poor performance which has directly resulted in a weak 2nd quarter for PVR, however, the regional content seems to be on track such as South Indian movies which have been able to assuage the impact of the poor performance of the movies industry.

PVR, India’s largest multiplex operator has reported a weak Q2 due to the big failure of Hindi films at the box office. Hollywood has also given a very poor quarter due to finite releases.

PVR is in the process of merging the business with INOX, which is in the final leg of the National Company Law Tribunal (NCLT) process. Ajay Bijli said that it will take 3 months to complete who is the Chairman & Managing Director of PVR Limited.

The company reported sales of Rs 687 crore, EBITDA of Rs 13 crore, and Profit After Tax (PAT) with a loss of Rs 71 crore for the quarter which ended on 30th September 2022.

Failure of Bollywood

The average gross collection of the top five Bollywood movies including Brahmastra and Laal Singh Chaddha for PVR have dropped by 37 percent in Q2 FY23 at Rs 25 crore comparing with Q2 FY20, when the average collection was around Rs 41 crore.

Hollywood has shown one of the worst quarters globally because there has been no poor content except Thor Love and Thunder. The total collection of Hollywood movies has dropped by 47 percent in Q2 FY23 at Rs 72 crore as compared to Q2 FY20 at Rs 135 crore.

Lower footfalls

Footfalls or admissions in Q2 fell to 1.8 crore from 2.5 crore in Q1. “Q3 has started on a good note with Ponniyin Selvan: I, Kantara doing well and Vikram Vedha and Doctor G performing decently. Hollywood releases would include Black Adams, Black Panther, and Avatar. If films fire up in November and December, the Q3 could look like where we were in Q1 in terms of footfalls,” said the CFO. Admissions were lower than pre-COVID levels as footfalls were at 2.7 crore in Q1 FY20.

Regional movies “A hit”

In Q2, the gross box office contribution of regional movies has risen to 44 percent from 28 percent in Q2 FY20 because of ventures like Sita Ramam, and Karthikeya 2 and others.

Considering the high traction for recently released Kantara, exhibitors have requested the producers of the film to be dubbed in Hindi. Within two weeks the Hindi version of the film was released in cinema halls which has been making good terms in the business and exhibitors have shown interest with higher admissions.

Poor Advertisement revenue

The poor performance of Hindi films impacted all of the metrics which includes the advertising revenue which has a great impact on the profits of the company.

The CEO of PVR believes that the advertisers want to see a good box office performance before they start advertising on a large scale.

Technical Analysis

PVR Weekly Candlestick Chart on Sharekhan’s TradeTiger

PVR stock price has made a double top which is marked with the horizontal lines. The price faces stiff resistance around Rs 2100. Hence this is a distribution zone for PVR. We can have shorting opportunities for PVR when the price of the stock rises above Rs 1950.

Currently, the price is slightly above the 200-day moving average which shows the stock is still in the bullish phase because of the higher highs and higher lows. MFI is at 40 points which indicates that the stock is relatively oversold.

PVR is a business which is dependent upon the output of great movies, hence this business suffers directly from the setbacks given by poor movie performance.

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