After surging more than 5% in the last two sessions, shares of PVR Inox ended 0.15% lower at ₹1,711.35 in choppy trade on Wednesday as investors resorted to profit booking after the recent rally. The midcap stock has been in momentum for the last one month and rose nearly 20% during the same period, riding on the success of recent releases such as Gadar 2, OMG 2, Jailer, Mission Impossible 7, Oppenheimer, Rocky Aur Rani Ki Prem Kahaani, and Satyaprem Ki Katha. The stock has registered a growth of 18% in the last three months following the merger of leading multiplex operators PVR and Inox Leisure in May this year.

PVR Inox achieved ‘highest ever daily and weekend admissions and box office collections’ in the weekend of 11-13th August on the back of solid box office performances from the stellar content released last week including Sunny Deol-starrer Gadar 2, Rajinikanth's Jailer, Akshay Kumar's OMG 2 and Telugu film Bhola Shankar. The momentum continued this week as the Independence Day holiday further boosted footfalls in cinema halls for movies. On August 13, PVR Inox had 1.28 million admits and 3.36 million admits from Friday to Sunday, with gross box office revenue of over ₹100 crore. Of this, more than 80% of the revenue came from Gadar 2 alone.

After the recent success at the box office, domestic brokerage houses ICICI Securities and Prabhudas Lilladher have upgraded the rating of PVR Inox. Domestic brokerage house ICICI Securities has reiterated ‘Buy’ rating on the stock with a revised target price of ₹2,240 from ₹1,950 earlier, an upside potential of 31% from the current market price. Prabhudas Lilladher also retained ‘Buy’ on PVR-Inox with a price target of ₹1,797 per share.

ICICI Securities in its report said investor concerns around digital disruption by OTT players was one of the key reasons behind PVR Inox’s de-rating. “Now, as a strong content pipeline manifests into tangible box office collections, we think investor concerns regarding relevance of movie exhibition in today’s context should be assuaged.”

“In our deep dive on PVR Inox, we analysed trends in the global music industry over the last two decades to understand the impact of digital disruption on the content industry. We noted that though digital streaming completely upended the physical distribution mediums (CDs, cassettes), the ‘experiential’ aspect of live music managed to grow at a steady CAGR of 6% over 15 years,” the report noted.

The agency says a similar trend is likely to play out in the movie exhibition business, given its ‘experiential’ appeal. “However, we believe the growth rates will be higher given the low penetration of screens in India and a strong growth outlook for discretionary incomes.” The brokerage upgraded its revenue, adjusted EBITDA and PAT estimates for FY24E/25E by 15%/7%, 48%/12%, and 62%/20%, respectively. “Accordingly, our revised target price is ₹2,240 (from ₹1,950 earlier) with an unchanged multiple of 16x FY25E adj.EBITDA.”

Going ahead, lower-than-expected performance of upcoming movies and merger synergies not playing out as expected remain key risks for the company, the report highlighted.

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