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Multiplex stocks reel as box office duds, boycott calls hit earnings

Stocks of theatre chains are suddenly facing several headwinds, including drawing moviegoers to multiplexes amid high ticket prices, the poor performance of big-budget Hindi movies and even social media calls to boycott certain movies.

The dismal box office collections of the much-awaited Hindi movie releases such as Laal Singh Chaddha, Raksha Bandhan, Shamshera, and Dobara during the fiscal second quarter have dampened investor sentiments in multiplex stocks such as PVR Ltd and Inox Leisure Ltd.

Strong box-office collections reported by multiplexes during the fiscal first quarter lifted investor sentiments, leading to multiplex stocks scaling 52-week highs in August.

However, shares of PVR and Inox Leisure, headed for a merger, have declined as much as 20% from their 52-week highs seen in August itself.

When a stock corrects 20% or more from its recent highs, it enters a bear market. The PVR stock has fallen from its high of 2,214.85 on 4 August on the NSE to 1,795.85 on 22 August. Inox Leisure has plunged 20% from its record high of 619.35 to 500.25 over the same period.

Notably, a footfall recovery and ticket pricing improvement complemented the good box office collections during the June quarter, leading to a strong performance for multiplexes. The same may not be repeated in the current quarter.

Jinesh Joshi, an analyst at Prabhudas Lilladher, said that with box-office collections of Hindi movies getting impacted, performance in the current quarter is likely to remain soft.

Analysts at Elara Securities India Pvt. Ltd, too, have said that slow recovery in Hindi box office collections (Hindi content) may be a potential cause for the near-term downgrade.

“Nowadays, viewers decide whether to watch a film after seeing its trailer,” said Girish Johar, producer and film business expert. “It shows that OTT consumption during the lockdown has had a bearing on viewer choice (of content) and behaviour. So, if your ticket prices are up and the content disappoints, you’ll end up running to emptier shows, and that will bear on stock performance.”

To be sure, trade analysts such as Atul Mohan are betting on upcoming releases such as Brahmastra, Vikram Vedha and Ram Setu to draw audiences back to multiplex chains such as PVR, which saw a 23% growth in average ticket price during the June quarter from the pre-pandemic June quarter of FY20.

The optimism around the festive season is also keeping analysts optimistic.

Analysts such as Joshi said that the pipeline remains good and stock valuations are attractive.

Meanwhile, broadcasters reported a contrasting performance to multiplexes, led by headwinds being posed by lower advertisement revenues. The same is leading to muted near-term growth prospects, analysts said. They said that the lower advertisement spending is on the back of the current inflationary environment, especially in the fast-moving consumer goods segment.

Not surprisingly, the Zee Entertainment Enterprises stock fell 20% year to date.

Zee Entertainment, which has been investing in video streaming platforms eyeing future growth prospects, however, is seeing high investments, too. Analysts attributed the June quarter’s impact on the operating performance of the company to the slower revenue recovery and aggressive content investments.

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