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Media Q4FY22 Preview: Multiplexes on recovery path!

ICICI Securities 08 Apr 2022

What’s buzzing:

Media companies would soon be announcing Q4FY22 results. Key highlight is recovery by multiplexes despite a washout first half of Q4 while broadcasters are expected to witness a divergent performance with superior advertisement growth in the news segment.

Context:

Q4 started on a dismal note for multiplexes with no major releases in the first half of the quarter. However, the box office staged a strong recovery from end of February with Kashmir Files, RRR, Gangubai Kathiawadi, etc, driving growth. Inox Leisure is likely to report superior footfall growth as it had capitalised on the sleeper hit “Kashmir Files” through higher screen allocation from the beginning. Consequently, we expect footfalls at ~11.5 mn and ~14 mn for Inox and PVR, respectively, up ~22% QoQ, down ~3% QoQ, respectively. Ad revenues are expected to be much lower at 30-35% of pre-Covid levels. We expect spends per head (SPH) for multiplexes to remain healthy, albeit lower QoQ due to content mix. We estimate EBITDA loss (ex-Ind-AS) of Rs 23 crore for PVR while we bake in EBITDA (ex-Ind-AS) of Rs 30 crore for Inox (~9% margins). PVR’s EBITDA losses are likely owing to muted footfalls and higher cost structure. A divergent performance among broadcasters is expected with news segment doing well (TV Today ad revenue growth of ~15% YoY) with state election tailwinds and global news heavy quarter while general entertainment channels (GECs) ad growth may be modest (Sun TV to ad growth at 8% YoY) owing to muted spends by FMCG companies amid inflationary pressures.

Our Perspective:

The multiplexes segment is poised for a strong growth ahead with strong line up ahead with big releases such as Bhool Bhulaiya 2, Runway 34, Jersey, etc and host of other Hollywood and regional releases. Moreover, consistent content flow will be key to much needed recovery in advertisement revenues, which flows largely to EBITDA and bottomline. PVR-Inox merger consummation will also drive emergence of bigger entity with synergy benefits and superior growth. Recovery of broadcasters, however, will be a function of how they maintain relative market share, ramp up OTT offering and implement the new tariff order, which has restricted subscription tariff hike, so far.

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