Latest Hindi Movie Sooryavanshi is getting postponed to 10th April instead of 27th March.
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This will have a spillover impact as 83 Biopic was slated to release on 10th April which will get further postponed.
All cinemas in Kerela have been shut down till 31st March – as per our understanding, Kerela state is approx 1-2% for Hindi movie content; however, regional cinema with SPI/PVR in particular will be negatively impacted.
Performance of Q4FY20 will be poor due to Sooryavanshi getting postponed and other content not doing well , except Tahnaji; expect Hindi Box Office to decline 10% YoY in the current qtr (Q4FY20).
Performance of Baaghi 3 has been about 20% below expectation, However our estimates were already revised downwards for that pre release and hence nothing new on that; however if the situation worsens at a rapid pace Baaghi 3 lifetime expectation of Rs 160 Crores may be revised further downwards.
In terms of valuation PVR/INOL are trading at 8.5x/7x based on FY22 EV/EBITDA; we don’t expect a large downside from current levels as most negatives are already factored in. Shall continue to monitor situation closely on the number of cases in India.
Cinema to remain shut in Delhi
DELHI circuit is almost 15-18% of Hindi Box Office
Big negative impact for multiplexes – larger impact of PVR as almost 7.5% of its screens are from Delhi whereas almost 3% of Inox screens are in Delhi state.
Sooryavanshi too has got postponed as per official notice, in line with expectations Which means Q4FY20 performance will be weak; Angrezi medium which is releasing tomorrow will see a big negative impact on collection. We Expect a spillover impact to follow for the other large movies slated to release over next 3 months.
We expect other states like Mah, Karnataka, TN and WB too to shut down cinemas if the number of cases intensify.
As per our channel checks, occupancy rates in cinemas have been stable at 20% over the last one week; in case the occupancy rates falls below 17%, it is better for multiplexes to shut property as Lower occupancy below 17% leads to losses; hence we believe that if larger movies are postponed and if occupancy falls below a threshold, cinema chains may too announce shut down given safety issues.
Valuations of PVR & Inox remain inexpensive largely factoring negative impact of shut down for 6-8 weeks; Will continue to monitor cases closely pan india.
Karan Taurani @ Elara Capital