Multiplex operators in focus; PVR, Inox Leisure up over 5% in a weak market

Analysts at Edelweiss Securities continue to maintain confidence in multiplexes’ long-term story
Shares of multiplex operators PVR and Inox Leisure were trading over 5 per cent higher in an otherwise weak market on the BSE on Monday amid expectation that cinema halls would be opened as part of 'Unlock 3'.

Inox Leisure has rallied 10 per cent to Rs 265 on the BSE on back of over 5-fold jump in trading volumes. At 10:20 am, the stock was trading 8 per cent higher with a combined 1.25 million shares changing hands on the NSE and BSE.

Shares of PVR were up 6 per cent to Rs 1,172 on the BSE, as compared to 0.6 per cent decline in the S&P BSE Sensex.

The Multiplex Association of India (MAI) has urged the central government to allow operation of cinema houses in non-containment zones in the country. The country went into lockdown from March 25 to contain the spread of coronavirus pandemic. As the Central government’s 'Unlock 2' is coming to an end on July 31, the Ministry of Home Affairs is preparing guidelines for 'Unlock 3'.

According to reports, the MAI is certain that cinema halls will be allowed to reopen for the public in the next phase of unlock. Earlier the Ministry of Information and Broadcasting had proposed the reopening of cinema halls to the Ministry of Home Affairs.

Analysts at Edelweiss Securities continue to maintain confidence in multiplexes’ long-term story owing to under penetration; cinemas, and multiplexes in particular, continue to remain the major revenue source for content producers; and tailwind to a shift from unorganised to organised retail.

“We believe business to resume once COVID-19 cases subside materially, thereby leading to a gradual pikcup in occupancy rates. We do believe that India remains highly under-pentrated in terms of screens or screens per million, implying ample room for expansion for leading players. In addition, we expect single screens to decline faster given survival issues in tough times. Single screens constituted 66 per cent of total screens in India in CY19 verus 78 per cent in CY15," the brokerage firm said in sector update.

“Although the prospects of cinema opening in the near term are high, there is uncertainty around movie releases and occupancy trends. Inox’s balance sheet provides some comfort, especially in terms of liquidity (in the process of raising Rs 75 crore in debt). Going forward, agreements with mall owners on rental costs and revenue sharing will be watched out for,” analysts at Emkay Global Financial Services said in company update.

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