Although the multiplex sector in India is not a new industry but remains a largely fragmented space with top four operators controlling only 24% of the screen share at the end of the previous fiscal year.
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The coronavirus could be a blessing in disguise for India’s leading multiplex chains with the consolidation of business now expected to be faster than earlier. Domestic brokerage and research firm ICICI Securities, in a note said that multiplex chains such as PVR and INOX Leisure may see increased occupancy as large screens move towards shutting down in the wake of the pandemic. “Our working shows 100bps higher occupancy will drive EBITDA higher by 9.1% and 11.7% for PVR and INOX, respectively,” the note said.
Although the multiplex sector in India is not a new industry but remains a largely fragmented space with top four operators controlling only 24% of the screen share at the end of the previous fiscal year. In the same year, ICICI Securities said that domestic box office collection was Rs 12,200 crore, and the estimated industry average ticket price (ATP) was Rs 130 with a footfall of 93.9 crore.
The brokerage firm said that Multiplexes’ box office revenue is estimated at Rs 5800 crore or 47% of the industry box office revenue driven by 32 crore admits or 34% of industry admits and ATP of Rs 180. On the other hand, single-screen theatres’ box office revenue was Rs 6,500 crore with 62 crore admits with ATP of 104. “Our working of single screen shows the business model is very fragile and has been surviving due to depreciated asset, owned property, and low operational cost,” the report said. Even KPMG India’s report on the sector expects permanent closing down of many single screens.
In the post-pandemic world, ICICI Securities expects footfall to reduce further for the industry. “We also estimate admits to fall by half of seat reduction due to affordability (higher ticket price of surviving screens), change in distance to nearest theatres etc,” they said. Overall the spillover effect is expected to work in favour of multiplexes in India. Currently, PVR has a 9% share in the Indian cinema market while Inox has a 6.6% share.
Analysts at ICICI Securities have a ‘Buy’ rating on PVR and INOX Leisure with a target price of Rs 1,679 and Rs 424 per share. PVR is trading at 11.1x FY23E EBITDA while the brokerage firm values it at 13x FY23E EBITDA. Inox is trading at 8.6x FY23E EBITDA, however, for the target price it is valued at 12x FY23E EBITDA. Both PVR and Inox have zoomed close to 10% so far in 2021.