Since the beginning of December 2022, the PVR share price has been building a base. Over the course of the year, PVR shares have dropped more than 10%, but in the last month, they have shown signs of breaking out of a sideways trend. According to the most recent Anand Rathi research report, the price of a PVR share is expected to reach 1,784 in one month. Since the current price of a PVR share is 1,530, the brokerage expects this multiplex stock to return more than 16%.
Anand Rathi’s report explains why he is so optimistic about PVR shares: “PVR share price has been under pressure for quite some time, but at this point it is trading near its key support. Before, the stock turned at this point and went up towards 2200. On the DAILY chart, there is a strong base formation and a regular bullish divergence, which looks good. So, we tell traders to buy the stock and set a stop loss at 1455.”
The multiplex company has improved not only from a technical point of view, but also from a fundamental point of view.CRISIL Ratings has removed its ratings on the bank facilities of PVR Ltd (PVR) from ‘Rating Watch with Positive Implications’ and has reaffirmed the rating at ‘CRISIL AA-/CRISIL PPMLD AA-/CRISIL A1+’ while assigning a ‘Positive’ outlook on the long term ratings and debt instruments and assigned its ‘CRISIL A1+’ rating to the short term rating transferred from the erstwhile INOX Leisure Ltd (INOX) to PVR Ltd.
The ratings have been taken off of “Watch with Positive Implications” because INOX and PVR have merged, which means that INOX no longer exists. The “Positive” outlook means that PVR’s credit risk profile could benefit from an increase in the size of its operations once more new content is released on multiplexes and keeps occupancy levels stable.
After merging with INOX, PVR is now the largest multiplex chain in India. It is in 115 cities across the country and has a total of 1,680 screens. Based on the number of screens, PVR will have a market share of 18% (43% in multiplexes) and will account for about 30% of all box office sales.
Due to some Bollywood content becoming more polarised and fewer Hollywood films coming out, the operating performance of multiplex operators was very different in fiscal year 2023. Also, most of the content that came out in the past year was thought up before or during the pandemic and needed to be updated to keep up with changing viewer tastes. But new content coming out in fiscal year 2024 and more Hollywood content should help even out the fluctuations in occupancy, which will still be a key metric to watch.
PVR INOX merger
As of September 30, 2022, the merged entity has a healthy balance sheet, with a pro forma adjusted tangible net worth of 2,089 crore. The management has said that they will add 180–200 screens every year, which will cost 750–850 crore (including maintenance capital expenditures) every year. Due to the size of the business, the capital expenditures will likely be paid for by internal accruals and debt, so that the total debt doesn’t grow much from where it was in March 2023.
The merger also allows for revenue synergies by coordinating the food and ticket menus, since INOX had lower prices for food and tickets than PVR, and by bridging ad revenues per screen, since INOX had lower ad revenues per screen than PVR.