ICICI Direct has expressed a bullish sentiment on PVR Inox, recommending a buy rating on the stock with a target price of Rs 2240. This recommendation is based on insights gathered from a research report dated March 31, 2024, where ICICI Direct highlights key takeaways from a meeting with Mr. Nitin Sood, the Chief Financial Officer of PVR Inox.
Key Takeaways from the Meeting:
- Rental Cost Reduction: Mr. Sood mentioned that the rental cost for PVR Inox may decrease to 16-17% of revenue within the next 12-18 months, down from the current 19-20%.
- Capex Sharing Contracts: The company is exploring capex sharing contracts with landlords to enhance Return on Capital Employed (RoCE). Additionally, the capex for FY25 is expected to be 35-40% lower than FY24.
- De-leveraging Focus: PVR Inox is prioritizing de-leveraging, with plans to liquidate non-core assets, particularly real estate space, to reduce debt levels.
- Screen Portfolio Optimization: Management aims to trim the screen portfolio to ensure an optimal footprint and retain brand premium.
- Ad Revenue Recovery: Ad revenues are anticipated to return to pre-COVID levels on an absolute basis by FY25.
- Post-Merger Synergies: The company aims to achieve additional post-merger synergies of INR 1.2-1.3 billion in FY25.
- Innovative Feature Piloting: PVR Inox is piloting a feature that enables movie-goers to order PVR food through the Zomato app.
Outlook:
Despite the challenges faced by the cinema exhibition industry, ICICI Direct maintains a target price of INR 2,240 for PVR Inox, based on a multiple of 16x FY26E adjusted EBITDA.
Disclaimer/Sources: Moneycontrol
