Is PVR Inox’s story compelling enough for investors to buy stock?

Notwithstanding the June quarter net losses, PVR Inox shares opened with 3% gains on the NSE as a couple of top brokerages continued to trust PVR’s growth story and its box office success. Hong Kong-based CLSA recommended a ‘Buy’ on the stock betting on a strong line-up of movies for the period ahead. Domestic brokerage Nuvama also remains positive on PVR Inox shares over the medium-to-long term.

However, Motilal Oswal adopted a cautious view, warning against performance volatility in Bollywood movies along with growth risks posted by deep-pocketed OTT platforms.

The company on Tuesday reported a consolidated net loss of Rs 82 crore for the quarter ended June 30 versus a net profit of Rs 53.2 crore in the corresponding quarter of the previous financial year.

The revenue from operations stood at Rs 1,304.90 crore for the quarter under review, up 32% year-on-year (YoY). The loss was primarily on the back of over 56% rise in the company’s expenses at Rs 1,437.70 crore versus Rs 917 crore in the year-ago period.

Here’s what brokerages are saying:

CLSA: Buy | Target: Rs 2,015
The foreign brokerage maintained a ‘Buy’ on PVR Inox shares, estimating a 28% upside for the stock over Tuesday’s closing price. The brokerage said PVR’s Q1FY24 EBITDA was up 34% quarter-on-quarter and was ahead of its estimates though expenses were up on account of escalation in movie exhibition costs. It said that a strong line-up of Hollywood movies, going ahead, augurs well for the multiplex chain along with a reduction in the volatility in the domestic movie space.

Nuvama: Buy: | Target: Rs 2,080
Nuvama also took a ‘Buy’ view on the stock and raised its price target from Rs 1,990 to Rs 2,080, estimating a 24% upside over the next 12 months.The company’s Q1FY24 revenue/EBITDA and reported loss of Rs 82 crore outshone Street’s and Nuvama’s estimates. Counting the positives, the local brokerage said that the content pipeline for Q2FY24 and FY24 remains robust. Its market share for Hindi and Hollywood movies rose significantly in Q1FY24.

We continue to reiterate our positive stance on multiplexes over the medium/long term. We are rolling forward the valuation to Q1FY26E,” Nuvama said in a note.

Motilal Oswal: Neutral | Target: Rs 1,650
Motilal Oswal has a ‘Neutral’ view of the counter and a target price of Rs 1,650, which suggests a 5% upside over Tuesday’s closing price. While the business is expected to see some recovery in 2QFY24, sustaining occupancy and recovery in ad revenue amid an increasing threat from deep-pocketed OTT players remain vital for growth.

The key monitorables will be performance volatility in Bollywood movies, advertising revenues and risks associated with increasing scale and the traction of movie releases over OTT platforms.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)