Multiplex stocks have been surging over the past month in India with the biggest players in the industry, PVR Cinemas and INOX Leisure, adding 20% or more to their stock value.
Grab your popcorn and get comfortable because we’re going to explore the reasons why PVR and INOX shares have been rocketing over the past month and whether or not you should invest in PVR and INOX shares.
What’s The Situation Of Multiplex Stocks?
The pandemic ravaged several businesses in India across multiple industries. Of these, companies that operate in the service sector like multiplexes saw some of the sharpest declines in revenue and stock price.
Shares of companies like PVR, INOX, and Cineline took a massive nosedive corresponding to lockdowns. The subsequent “will it, won’t it” type of uncertainty that was attached to theatres reopening made matters worse.
Here’s a look at the drop in share prices of Inox, PVR, and Cineline between 20-02-2020 to 20-05-2020.
|
Stock
|
Drop (in ₹)
|
Drop (in %)
|
|
INOX
|
294
|
60
|
|
PVR
|
1199
|
58
|
|
Cineline
|
17.7
|
48
|
A 40-60% drop in share price would give any investor a nightmare unless you had an expert advisor like Purnartha by your side. However, the new normal now seems to have a place for movie theatres.
Several multiplexes have opened across the country in cities like Delhi. States like Maharashtra have announced SOPs for reopening theatres on 22-10-2021.
That’s primarily why multiplex stocks, especially PVR and INOX shares have been surging over the past month.
|
Stock
|
Value On 17-09-2021
|
Value On 13-10-2021
|
% Growth
|
|
PVR
|
1392
|
1,713.90
|
23
|
|
INOX
|
306.20
|
412.15
|
34
|
What Are The Positives For PVR And Inox Stocks?
PVR and INOX have a strong reach across the country. Both companies are also fuelled by the movie and entertainment industry that is also bouncing back to full strength. Let’s look at these positives in greater detail.
1. Big Upcoming Movie Releases
PVR and INOX shares surging coincide with the festive period in India from October to December. Apart from delicious sweets, this period is also known for movies that are billed as “superhits”.
These superhits can achieve that tag essentially through ticket sales at multiplexes like PVR and INOX. That’s why big movie releases generally mean big box office collections for multiplexes.
Logic suggests that the jump in revenue can offset the losses incurred (to an extent) during the pandemic by multiplexes like PVR and INOX. However, it remains to be seen whether theatres hit full capacity by then.
2. Nationwide Reach
PVR and INOX are not run of the mill multiplexes. In fact, data suggests that PVR and INOX operate in 70+ cities while PVR is present in Sri Lanka as well. This “reach” is a double-edged sword.
Overhead costs may skyrocket when the multiplexes are non-operational and lead to severe losses. But when open, these locations can churn out relatively high revenue.
While we’re on the topic of revenue, you’d be interested to know that both PVR and INOX made a net loss in Q1 FY 2021-22. This basically means that their expenses were more than their income.
3. Reopening Of Theatres
Truth be told, multiplexes are nothing without moviegoers. That’s why PVR and INOX will be especially relieved to learn of the reopening of theatres in cities like Delhi and soon in Mumbai.
The latest regulations have allowed theatres to welcome as much as 50% of the total people that they can accommodate. News of this had led to a surge in PVR and INOX share prices.
Whether this will continue to be the case remains to be seen. There are growing concerns about a third wave, which is why states like Maharashtra have allowed movie theatres to reopen much later than other states.
Is It Worth Buying PVR And Inox Stocks?
On the face of it, the surge in PVR and INOX share prices may seem like it’s down to theatres reopening. But there’s more to it than that. For example, PVR and INOX have made significant losses during the pandemic.
In fact, INOX had to invoke the force majeure clause just to stave off rent. Whether this surge in PVR and INOX share prices is a flash in the pan remains to be seen.
But the answer to whether you should buy PVR or INOX shares would become much easier if you have a reliable advisor like Purnartha by your side. They’ve been consistently outperforming Nifty over the past decade.
Sounds like you? Check out Indian Equity Advisory by Purnarth on Cube
Note:
Facts & figures are true as of 13-10-2021. All information mentioned is for educational purposes and relies on publicly available information. None of the information shared here is to be construed as investment advice. We strongly recommend you consult a Cube Wealth coach before investing your money in any stock, mutual fund. PMS or alternative asset.
