Why PVR Share Price is Falling

Most of us are fond of smooth long drives. Careful driving without a single hiccup, with adequate speed on smooth roads are the best.

However, sometimes no matter how careful you are, you end up with back pain because potholes interrupted your ride.

Something similar is happening to PVR.

After facing the headwinds of the lockdown, and tough competition from OTT platforms, PVR's share price was rising.

As people steped out of their homes and made their way into theatres, PVR saw some respite in its financials. A recovery was on the cards.

PVR share price was rising gradually before it started falling in the past one month. In the last month, PVR share price fell by 14%.

So why are shares of PVR under pressure now?

Read on as we analyse the probable reasons for the fall...

#1 Back-to-back flop films

The last hit Bollywood movie at the box office was Bhool Bhulaiya 2. It was released back in May 2022.

After that, the next big movie to make its debut at the box office was - Laal Singh Chadha. The audience expected a lot from the movie because of two reasons - The perfectionist 'Aamir Khan' and the movie was a remake of the famous movie 'Forrest Gump'.

However, the movie turned out to be a disaster at the box office.

Even Akshay Kumar's Rakhsha Bandhan met a similar fate.

People looked forward to watching 'Brahmastra', a movie starring newly-weds Ranbir Kapoor and Alia Bhatt. People waited for more than five years to see Ranbir Kapoor on a big screen in a superhero blockbuster.

Good actors and superb VFX effects raised the expectations of the audience.

The movie was attracting good traffic, and it seemed like Bollywood would finally revive. But after the movie was out, critics gave bad reviews and audiences were disappointed once again.

However, Brahmastra broke some records at the box office and defied the reviews of critics.

Owing to this, shares of PVR have seen some respite in the past two days.

#2 Poor financials

Covid-19 had hit all types of businesses. But the award for the worst hit businesses would go to the multiplex sector and the travel industry.

Strict lockdowns and social distancing kept the cinema halls shut for a long time. Hence, there was no revenue to report but maintenance costs were intact.

However, with the Covid-19 easing, people have started coming back to theatres.

While PVR's financials have not reached the pre-Covid levels, they show some recovery.

Take a look at the table below, which shows the drastic reduction in profit in the Covid-19 affected period and a recovery in the financial year 2021-22.

Financial Snapshot

Particulars (Rs in m)	FY18	FY19	FY20	FY21	FY22
Total Income	23,683	31,206	34,545	7,555	16,595
Growth	8%	32%	11%	-78%	120%
Operating profit	4,332	6,195	11,144	1,344	4,319
Operating profit margin	18%	20%	32%	18%	26%
Net profit	1,248	1,906	274	-7,476	-4,885
Net profit margin	5%	6%	1%	-99%	-29%

Data Source: Ace Equity

As can be seen from the table above, some sort of revival is seen in its financial statements.

For quarterly results too, PVR has shown an improvement.

After reporting consecutive losses for more than seven quarters, PVR finally posted a profit in Q1.

Quarterly Results

Rs m, consolidated	Jun-21*	Sep-21*	Dec-21*	Mar-22*	Jun-22*
Net sales	594	1,203	6,142	5,371	9,814
Other income	332	1,549	956	425	209
Turnover	926	2,752	7,097	5,797	10,023
Profit after tax	-2,196	-1,533	-102	-1,055	532

Source: Equitymaster

#Investment Takeaway

An investment in a stock is said to be risky when the decline in share price is continuous and one cannot predict when the share price will recover.

However, all companies face short-term problems. The fall of PVR's share price is just like that. One hit movie and the audience will pour back in. And that may change the whole scenario for PVR's share price.

Recently, the Mumbai bench of the National Company Law Tribunal (NCLT) directed PVR to get shareholders' approval for a merger with its rival Inox Leisure.

Following this order, PVR has called a shareholder meeting to be held on 11 October 2022.

If the merger gets approved, there will be great synergies for both companies.

Also, the cinema business in India is a high-growth business. Indians love watching movies. On the supply side, India produces more movies per year than any other country in the world.

This is the reason why many analysts have come up with rave estimates for the industry. As per some estimates, the Indian cinema industry will grow in double digits for the next decade.

Another interesting fact is that the industry has been consolidating for the last few years. The single-screen cinemas have been losing their market share to multiplexes. And the pandemic has only accelerated this trend.

The merged entity, the largest multiplex chain with a network of more than 1,500 screens, stands to be the biggest beneficiary of this trend.

Another thing that investors should take note of is PVR's premiumisation effort. PVR is focusing on providing a luxurious experience to its customers.

PVR's premium services account for 10-11% of its total revenue. The company aims to increase it to 20% by 2025. We could see the premiumisation efforts continue post-merger.

Research Analyst at Equitymaster Aditya Vora has recorded a video discussing multiplex stocks.

In the tug of war between theatres and OTT, Aditya believe theatres will triumph and create long term wealth for investors. Watch the video for more details...

About PVR

PVR Ltd (formerly Priya Village Roadshow), doing business as PVR Cinemas, is an Indian movie theatre chain in India with its headquarters located in Gurgaon, Haryana, India.

PVR pioneered the multiplex revolution in India by establishing the first multiplex cinema in 1997 at Saket, New Delhi, India.

It now provides different services under different names. Apart from running PVR Cinemas it also runs PVR Gold, PVR Director's cut, PVR Imax, etc.

To know more, check out PVR's financial factsheet and its latest quarterly results.

You can also compare PVR with its peers:

PVR vs Inox Leisure

PVR vs Balaji Telefilms

PVR vs UFO Moviez

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...