PVR-INOX Q2 FY25 advertising revenue up 17% QoQ at Rs 1.1 bn

After a weak Q1 due to the Lok Sabha elections, IPL and T20 Cricket World Cup, PVR-Inox (PVRL) saw a recovery in occupancy to 25.7% in Q2 FY25 (from 20.3% in Q1), though it remained weak YoY due to a high base. Revenue recovered sharply QoQ by 36% (in line; down 19% YoY on high base), aided by strong responses to movies like ‘Stree 2’ and ‘Kalki 2898 AD’. EBITDA (pre-Ind-AS 116) bounced back to green at Rs 1.9 billion (10% beat) vis-a-vis a loss of Rs 378 million in Q1. The Q1 EBITDA margin expanded to 11.5% (75bp beat).

As per Motilal Oswal Financial Services’ analysis, Q3 is expected to be robust with the release of several tentpole movies, such as ‘Pushpa 2’, ‘Bhool Bhulaiyaa 3’, and ‘Singham Again’.

However, PVRL’s business remains highly sensitive to occupancy trends, which are dependent on the quality of content (not in PVRL’s control). Although the management sounded upbeat about the FY26 content pipeline, Motilal Oswal Financial Services notes that even a 200-300bp blip in occupancy could derail the company’s screen economics.

It keeps its FY25/ FY26 revenue estimates broadly unchanged, but revises its EBITDA estimates by +7%/ -4%.

Sequential recovery drives EBITDA/ PAT beat, but weak YoY on high base

PVR-Inox’s consolidated revenue declined 19% YoY (on a high base), but recovered significantly by 36% QoQ to Rs 16.2 billion (in line). The recovery was driven by blockbuster movies like ‘Stree 2’ and ‘Kalki 2898AD’.

PVRL added 16 screens at two properties and closed 25 screens, which resulted in a net reduction of nine screens in Q2 FY25.

Depreciation increased 4% YoY (9% QoQ, 6% above). As a result, PAT (profit after tax) came in at Rs 224 million (versus est. Rs 188 million).

PVRL incurred a capex of Rs 2.1 billion during 1H, which, along with interest payments, led to FCF of Rs 1.3 billion (-58% YoY). PVRL used FCF to reduce net debt by Rs 1.4 billion in H1 FY25 to Rs 11.5 billion.

Occupancy recovers in Q2; likely to improve further in Q3

Admits and occupancy: PVRL’s admits improved 27% QoQ (down 20% YoY) to 38.8 million (in line) and the occupancy rate improved to 25.7% (versus 20.3% QoQ and 32.3% YoY). Given a strong content pipeline, Motilal Oswal Financial Services expects occupancy to further improve in Q3 FY25.

Ticketing: Ticketing revenue recovered 41% QoQ (- 25% YoY) to Rs 8.4 billion, aided by higher occupancy and 9% QoQ improvement in ATP to Rs 257 (-7% YoY, in line). Ticketing gross margin improved as the movie exhibition cost accounted for ~39% of ticketing revenue (versus 41% QoQ, 44% YoY).

F&B: F&B revenue also recovered 30% QoQ to Rs 5.2 billion (down 18% YoY), driven by higher footfalls and 1% QoQ (flat YoY) SPH at Rs 136 (5% miss). F&B gross margin improved QoQ as COGS accounted for 24.3% of F&B sales (versus 25% QoQ, 24.1% YoY).

Advertising and convenience income: Advertising revenue was up 17% QoQ (-7% YoY) at Rs 1.1 billion, while convenience revenue was boosted by integration related fees on Paytm’s ticketing business sale to Zomato.

Future outlook

Robust pipeline: The company expects Q3 to be robust with potential blockbuster movies in the pipeline, such as ‘Singham Again’, ‘Bhool Bhulaiyaa 3’, ‘Baby John’, ‘Pushpa 2’, etc.

Screen additions outlook: PVRL expects to add 110-120 screens in FY25, with net screen additions of ~50. For FY26-27, the management expects to add 80-120 screens, with 15% of them to be in the FOCO model, 35-50% in the asset-light model and the balance in the structured lease model.

Capex: The management has guided for a capex of Rs 4 billion in FY25 (Rs 2.05 billion in H1) and Rs 4-5 billion in FY26.

Re-releases strategy: The new strategy of combining fresh blockbusters with nostalgic re-releases in lean weeks has resonated well, as ~6% of Q2 admissions came from the re-release and PVRL is profitable in re-releases despite lower ATP.

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