Shares of multiplex company PVR Ltd are still as much as 32% away from their pre-covid highs seen in February 2020. Not without reason. The multiplex sector has been among the worst hit due to the covid-19 pandemic, with operations remaining closed relatively longer than other sectors.
Cinemas were allowed to restart operations from mid-October with 50% capacity. But PVR’s December quarter results show that this hasn’t helped much. The company reopened theatres in a staggered manner but there has been no improvement in revenue performance. For the December quarter, consolidated revenues for it declined by 95% vis-à-vis last year’s same quarter to ?45 crore. Analysts from JM Financial Institutional Securities Ltd said in a report on 15 January, “Quite surprisingly, revenue was similar sequentially despite progressive re-opening of theatres from mid Oct-20 onwards versus complete shutdown in Sep-Q. Limited content availability seems to be the primary reason here (note that 2QFY21 benefitted from movie distribution revenues).”
With revenues evaporating, profitability was under pressure. PVR reported a loss at the earnings before interest, tax, depreciation and amortization (Ebitda) level worth ?78 crore. “Ebitda loss adjusted for Indian Accounting Standard (Ind-AS) 116 lease accounting stood at ?125 crore in 3Q, marginally better than our estimate,” said analysts from Kotak Institutional Equities in a report on 18 January. The company has managed settlements with landlords for 88% of cinemas for complete or partial waiver/discounts for the lockdown period. PVR’s monthly fixed expenses (including rent and common area maintenance) for the December quarter stood at ?52.7 crore, 64% lower year-on-year, although 60% up sequentially as operations resumed.
Further, debt has increased sequentially. Consolidated net debt rose to ?1,127 crore as on 31 December from ?902 crore as on 30 September. Meanwhile, the company has a reasonable liquidity cushion. IIFL Securities Ltd estimates that the present cash position can support cash burn for five months (at current occupancy levels). “Equity raise (enabling resolution taken for up to ?800 crore) could place PVR well, to participate in industry consolidation once things normalize,” said IIFL’s analysts in a report on 18 January.
In the near-term, outlook remains tough. Investors should watch how movie content releases are shaping up. True, the better-than-expected response to the recently released Tamil movie, Master is encouraging. This could well have a positive influence on releases of Bollywood and other regional movies. Overall, even as the current financial year (FY21) is forgettable, a slower pace of recovery would pose a risk to FY22 earnings as well. The PVR stock’s underperformance since the pandemic impact began seems to capture the fears adequately.
News Source:- livemint