PVR, Inox Shares Soar On Maharashtra Cinema Hall Reopening Plan
Shares of multiplex chains PVR Ltd. and Inox Leisure Ltd. hit their highest levels since March 2020 after Maharashtra Chief Minister Uddhav Thackeray said theatres and auditoriums in the state will be allowed to reopen after Oct. 22.
The Chief Minister's office, in a tweet, said that the state will soon announce the standard operating procedures.
PVR's stock jumped as much as 10% to Rs 1,610.9 apiece, while INOX climbed up to 18.4% to Rs 413.9.
Maharashtra is the largest market for both the chains, according to their disclosures. While PVR runs 151 screens in the state, INOX operates 133.
PVR was the best performer on Nifty Smallcap Index, with a trading volume that was 2.3 times the three-month full-day average. Inox was the best performer on S&P BSE 500 Index, with a trading volume 3.5 times the three-month daily average.
Mall operator Phoenix Mills Ltd. also jumped as much as 9.1% to a record high of Rs 1,030 apiece after the announcement.
In a note dated Sept. 21, brokerage Kotak Institutional Equities said it expects PVR’s business to recover over the second half of the fiscal year as Covid-19 restrictions ease. “Pent-up demand can potentially drive a surprise.”
It maintained its ‘buy’ and revised its fair value to Rs 1,700 from the earlier Rs 1,550. The brokerage expects PVR to emerge stronger on two counts:
Permanent downward reset in cost structure to the tune of 10% of employee and other fixed costs.
Capex intensity and competitive intensity, especially in new lease signings, can potentially moderate.
PVR’s stock has derated versus consumer discretionary and retail names and is a laggard among the ‘economy opening-up’ counters, largely due to uncertainty around structural risks, Kotak said. “We do not rule out modest rerating in PVR’s valuation as operating metrics (especially occupancy) recover fully and concerns ease.”
The brokerage expects PVR to command a higher multiple if it caters to the food and beverage delivery market and ramps up its overall sales in the segment, improving profitability.