PVR, Inox Q3 Results: Strong Recovery, Weak Q4 Outlook
Analysts expect recovery for the film exhibition sector will now be delayed to Q1 FY23.
The re-imposition of restrictions by various state governments on multiplex operations amid a third wave of Covid-19 infections has dashed hopes of a sustainable recovery for the industry. India's largest multiplex chain said it expects business to take a severe beating again in January and February.
Most states have restricted cinemas to operate at 50% capacity, while some such as Telangana, Andhra Pradesh and Madhya Pradesh have not imposed such limit. Delhi and Haryana have ordered shutting down of multiplexes.
“The first two months of 2022 would be slower due to deferred releases and as cinema halls remain closed temporarily in Delhi and Haryana,” Nitin Sood, chief financial officer at PVR Ltd., told Bloomberg Quint after the company announced its Q3 FY22 earnings. "Blockbuster content such as Jersey, RRR, Prithviraj are some which have deferred release." He, however, expects March to be a “great one” with both key markets set to open in a couple of weeks and new content kicking in towards the end of February.
Inox Leisure Ltd.'s management also echoed that in its investor presentation for the October to December 2021 quarter. Operations have been impacted due to the third wave, the company said, adding that it has begun approaching landlords for renegotiation of rent agreements. However, this time the impact seems to be "less severe", it said.
Analysts, too, forecast the fourth quarter of fiscal year 2021-22 to be sequentially weaker.
Rating agency ICRA Ltd. has maintained a negative outlook on the film exhibition sector until it achieves a full and sustainable recovery. With several large-budget movies now ready for release, a turnaround may begin in the first quarter of the next fiscal, Jay Sheth, vice president and sector head wrote in a note on Jan. 21. He expects the Q1 FY23 recovery to be "stronger and faster".
The October to December quarter offers some cues on pent-up demand. Both multiplex operators recorded a blockbuster financial performance. The sharp recovery was driven by an increase in occupancy and higher average ticket prices and spend per head as cinemas reopened completely after state-wide Covid-19 restrictions were lifted.
PVR Vs Inox: Q3 Financials
PVR reported a 5.1 time jump in revenues sequentially, while Inox saw revenue surge 5.7 times, according to their filings with stock exchanges.
Both companies narrowed losses.
“Q3 was the best since the pandemic outbreak in March 2020 on the back of several Bollywood releases,” said PVR's Sood.
The steady rebound also reflected in the box office performance of movies released in Q3 such as Sooryavanshi (Rs 196 crore), Annaatthe (Rs 110 crore), Spiderman: No way Home (Rs 212 crore), 83 (Rs 102 crore) and Pushpa: The Rise (Rs 248 crore), as per data shared by both companies.
During the quarter, PVR delivered a positive operating margin at 10.3% and said that it has finally stopped burning cash after six consecutive quarters.
Inox, too, turned Ebitda positive during the festive quarter.
PVR operates 179 cinemas with 860 screens in 73 cities across the country, while Inox operates 158 multiplexes with 667 screens in 70 cities.
Inox also added 41 screens in crisis-hit 2021 - the highest in the industry.
Ticket Prices Rising
Inox reported its highest-ever quarterly average ticket price and spends per head in Q3. At PVR, the average ticket price rose 20% and spend per head went up 22% over pre-pandemic levels.
Footfalls, however, are still 44% lower than pre-Covid Q3 FY20, noted PVR.
Advertising Lags
Yet, higher-margin revenue sources, such as advertising income, which ordinarily comprises 10-11% of overall revenue, continue to lag for both companies.