Investors saw a sharp jump in share price of PVR Ltd and Inox Leisure after the West Bengal government announced that it will allow cinema halls to open for a limited crowd from October 1. Shares of PVR were up 11% trading at Rs 1,222.75 per share while those of Inox Leisure were seen surging over 7% to trade at Rs 274.75 per share. With the unlocking of the country post the serious lockdown that was imposed in the months of April and May, more and more activities have been allowed in a phased manner. However, opening of multiplexes was still not undertaken by any government.
Shares of PVR have so far surged over 60% from their lows in May this year. Inox Leisure shares too have taken a similar trajectory over the last few months. The opening up of multiplexes, however, will only see 50 or less people gathering at once. Multiplexes will also have to adhere to guidelines of social distancing while opening up theaters. “We believe that this is a positive development for multiplex companies like INOX Leisure and PVR. Moreover any relaxations provided by the central Government in Unlock 5.0 would also be positive for the sector,” said Jyoti Roy – DVP- Equity Strategist, Angel Broking.
However, there is still uncertainty about when the sector would enjoy similar relaxations across the country. The cost cutting efforts undertaken by the sector players have helped them tide through 6 months of no business. EBITDA loss for PVR stood at Rs 115.9 crore with fixed operational expenditure of just Rs 32 crore every month, against the expected Rs 40 crore. “We continue to maintain our positive stance on the multiplex space and retain our ACCUMULATE rating on PVR by raising our target EV/EBITDA multiple to 12x,” said brokerage and research firm Prabhudas Lilladher earlier this month.
Earlier during a conference call PVR said that break-even occupancy is 18-20% on the current low cost base. The 50 person limit would not augur well with that. But, Jyoti Roy of Angel Broking is still optimistic. “We continue to maintain our positive stance on the multiplex sector as we believe that the long term fundamentals remain intact despite the medium term issues,” he added.
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