PVR Inox stock falls 13% in 2024 due to dearth of blockbuster movies; is this the right time to invest?

Following a sluggish start to 2024, PVR Inox has shown signs of recovery in June, with the stock rising nearly 10%. This uptick follows a slight decline of 3.8 percent in May.

Before that, the stock had risen by 2.6 percent in April but faced losses in the first three months of the year. It declined by 3.3 percent in March, 5.8 percent in February, and 12.3 percent in January.

Overall, in 2024, the stock has declined 13 percent while it has been flat in the last 1 year, down 0.23 percent.

Moreover, currently at ₹1,436.85, the stock is 23.5 percent away from its 52-week high of ₹1,879.75, hit on September 8, 2023. Meanwhile, it has advanced over 19 percent from its 52-week low of 1,203.70, hit on June 4, 2024.

Amid a scarcity of blockbuster movies and a pivot towards cricket, is now the opportune moment to invest in this theatre stock? Here's a comprehensive analysis of its fundamental and technical outlook.

Fundamental View

Brokerage house Emkay has retained its ‘buy’ call on PVR Inox with a target price of ₹1,650, implying an over 15 percent upside. As per the brokerage, the dearth of movies is pulling down the performance of the stock.

"PVR Inox’s weak stock performance reflects the lack of major movie releases over the last couple of quarters. After a subpar Q4FY24, Q1FY25 is also turning out to be a damp squib, with the IPL, the T20 World Cup, and the general elections being hurdles for movie releases. The chain’s high fixed-cost structure has aggravated this issue, hitting profitability. The company should see some respite ahead, as the pipeline has improved, even though mega-star movies are likely to be released only in CY25," said the brokerage.

It further noted that the management has started taking initiatives on both, the revenue and cost fronts, aimed at maximising profitability, though the fruition of some of these efforts is likely not before the medium term. With structural issues persisting, occupancies are unlikely to rebound to pre-Covid levels which is, though, in the price. Stock performance continues to hinge on improvement in box-office collections, it added.

Technical View

Brokerage house Anand Rathi advised to "go long" on PVR Inox with a target of ₹1,700, implying a 19 percent upside and a stop loss of ₹1,250 for a time frame of 6 months.

PVR Inox has recently exhibited two significant technical analysis signals that indicate a potential bullish shift. Firstly, there is a bullish divergence on the weekly Relative Strength Index (RSI) near the 30 level. This divergence suggests that while the stock's price was declining, the RSI was starting to increase, indicating a possible reversal in momentum. Secondly, the stock has broken through a bearish trend line of RSI weekly that had been in place for approximately 7 months, explained Anand Rathi. This trend line breach is a critical signal, suggesting that the long-term bearish trend may be reversing to a bullish trend.

Based on these technical indicators, investors and traders are advised to "go long" on PVR Inox, purchasing shares within the price range of ₹1,370-1,430. The stock is projected to have an upside target of ₹1,700 per share, highlighting a significant profit potential. To mitigate risk, it is recommended to place a stop-loss near ₹1,250 per share on a daily closing basis, ensuring protection against potential adverse movements, it said.

About the Firm

PVR Limited (PVR) is India’s largest film exhibition company. It pioneered the multiplex revolution in India by opening its first multiplex cinema in New Delhi in 1997 and continues to lead the market with a strong focus on innovation and operational excellence to make the big-screen movie experience accessible to all. Currently, PVR operates a cinema network with 854 screens across 74 cities and 173 cinemas, totaling 180,000 seats.

In FY22, PVR's revenue breakdown showed that approximately 52 percent of its revenues come from the sale of movie tickets. Revenue from food & beverages contributes 30 percent, while advertisement income, convenience fees, and other businesses each contribute 6 percent to its overall revenues.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.