Financial advisory firm Elara Capital maintains 'buy' call on PVR, INOX

Financial advisory firm Elara Capital has maintained a ‘buy’ call for both multiplex companies PVR and INOX Leisure. Both film exhibition majors on Sunday announced a merger, and their boards have approved an all stock amalgamation. Shareholders of INOX will receive shares of PVR in exchange of shares of the former at the approved exchange ratio, as per a statement.

“We maintain our Buy rating on both PVR/Inox; currently have a target price of Rs. 2,375 and Rs. 575, will monitor further developments but there is a high likelihood of a 15-20 percent upgrade on the target prices due to synergy and re rating”, Elara Capital said in a note post the announcement of the merger. It believes both entities

getting merged will lead to better yields on advertising, wherein Inox will come on par with PVR, and the combined entity may even command a further premium over medium term.

Market share may trend up, as the combined entity may gain from smaller chains and single screens that have struggled due to covid

“In terms of convenience fee too, Inox derives a much lower convenience fee per screen, which too will be revised upwards. Market share may trend up, as the combined entity may gain from smaller chains and single screens that have struggled due to Covid”, the financial advisory firm said.

In terms of ticket prices and spend per head too, Inox is at a 5-25 percent discount vs. that of PVR and the brokerage expects Inox to move towards rapid premiumization in line with PVR. “We believe use of technology like 3D, 4D and other new technologies will drive ticket prices higher. Further introduction of gourmet food will drive spend per head metric higher,” the firm added.