Should one buy PVR stock, as Kalki 2898 AD, Deadpool & Wolverine footfalls pickup. 'Kalki 2898 AD' Fuels Hope for PVR Inox: Hollywood Hit & Ad Revenue Boost Expected
After a lackluster first half of the year, the Indian film industry is poised for a resurgence, driven by a promising lineup of releases, including the highly anticipated 'Kalki 2898 AD'. Nuvama, in a recent note on PVR Inox, predicts a significant boost to the multiplex operator's performance, fueled by a combination of strong content, improving advertising revenue, and a strategic focus on debt reduction.
'Kalki 2898 AD', starring Prabhas, Deepika Padukone, Amitabh Bachchan, and Kamal Haasan, is expected to generate massive box office numbers, potentially clocking ₹100 crore in India on its opening day. The film's global appeal is evident, with record-breaking pre-sales in the US exceeding $2.6 million.
"Key marketing activities such as unveiling of the theme song in Mathura and early-morning shows bode well. Initial advance bookings response (domestic) for the film seems to be promising with tickets worth Rs 6.08 crore sold," Nuvama stated.
The excitement surrounding 'Kalki 2898 AD' is likely to be followed by a wave of Hollywood blockbusters, with 'Deadpool & Wolverine' starring Ryan Reynolds and Hugh Jackman slated for release on July 26th and 'Transformers One' featuring Scarlett Johansson and Chris Hemsworth scheduled for September 20th.
Nuvama also highlights the positive outlook for advertising revenue, with a projected 11.8% growth in the Indian advertising market in 2024. PVR Inox, as the dominant multiplex player, stands to benefit significantly from this trend, particularly with its 30-35% ad revenue coming from long-term deals with advertisers.
The brokerage firm further notes that PVR Inox's management is prioritizing becoming net debt-free in the coming years. This includes exploring monetization of real estate assets, potentially generating ₹300-400 crore in value. The company is also adopting a 'capital-light' model, targeting a 20% reduction in annual capital expenditure by exploring alternative models like FOCO (Franchisee-owned, Company-operated) and partnerships with developers.
All in all, Nuvama reiterates a 'BUY' rating for PVR Inox, with a target price of ₹1,995. The positive outlook for content, advertising revenue, and strategic debt reduction positions PVR Inox for strong growth in the coming months.