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PVR Inox Ltd., a leading multiplex chain in India, witnessed a decline of 2% in its share price on Tuesday following a price target reduction by global brokerage firm UBS. Despite maintaining a 'Buy' rating on the stock, UBS reduced its price target to ₹1,800 per share from ₹2,075 earlier, reflecting a 20% upside from Monday's closing levels.
UBS cited a challenging first half of the financial year 2025 as the primary reason for the price target reduction. The brokerage believes that the science fiction film 'Kalki 2898 AD', released on 27 June in six languages, including Hindi, English, and four southern languages, might not be enough to drive positive EBITDA for PVR Inox in the first quarter of this fiscal.
PVR Inox heavily relies on regional language films, accounting for two-thirds of its collections, but the company's presence in this segment is limited. UBS highlighted that while 'Kalki 2898 AD' received positive feedback from viewers in several regions, its impact on PVR Inox's financial performance in the first quarter is expected to be minimal.
The brokerage also expressed concerns about a potential reluctance among consumers to watch movies in theaters. Elara Securities, in a recent report, echoed these concerns, predicting a weak box office performance for 'Kalki 2898 AD' in Hindi, citing poor advance bookings. Given that PVR Inox commands a 45% market share in the Hindi film genre, a muted lifetime box office collection of ₹70-80 crore for the film could have a significant impact on its overall revenue.
PVR Inox's presence in regional markets is comparatively smaller, with a market share of only 8-10%. Although the company's shares saw a 6% surge on Monday, fueled by hopes of increased footfall, the recent decline suggests a cautious outlook among investors. The stock is currently trading at ₹1,472.50, down 1.69% on Tuesday, reflecting the market's response to the UBS report.
The stock's performance has been volatile in recent months, with a 12% decline year-to-date but an almost 7% rise over the past 12 months. The current price target cut by UBS, along with concerns about the film's impact on PVR Inox's earnings, suggests that the stock might remain rangebound in the near term. However, the company's 'Buy' rating suggests that UBS remains optimistic about PVR Inox's long-term prospects, potentially driven by factors like the anticipated growth in the entertainment sector and the company's strategic expansion in regional markets.
Source: 'Kalki 2898 AD' is not enough — PVR Inox gets a price target cut and may remain rangebound