PVR Inox share price cracks 37% from recent peak. Is it time to buy the dip? | Stock Market News

Shares of PVR Inox, the country’s largest multiplex network operator, have been experiencing heavy selling pressure from Dalal Street investors in recent sessions. The stock has corrected by 30% over the last six weeks and is down by 37% from its September peak of ₹1,748 per share, now trading at ₹1,100. 

In the previous trading session, it reached levels not seen since April 2021. The recent decline has also significantly eroded the company’s market capitalisation, which currently stands at nearly ₹11,000 crore, down from ₹16,553 crore in just four months.

The sharp correction in the stock can be attributed to weaker-than-expected Q3FY24 numbers and concerns over the HMPV virus. However, domestic brokerage firm JM Financials’ analysis shows that most of the selling in the stock was driven by arbitrage funds.

Arbitrage funds typically buy a stock in the cash segment and sell its future contracts to net the spread. As per JM Financial, PVR-Inox’s spread was elevated in October, likely on the expectations of strong Q3FY25 results.

However, barring Pushpa 2, the box office (BO) performance of other movies didn’t live up to expectations. This, combined with the broader market correction, narrowed the spread.

Additionally, the brokerage highlighted that PVR-Inox’s exclusion from F&O would have triggered the unwinding of this trade, resulting in a sharper correction in the stock. The less than 1% holding of arbitrage funds now suggests that the technical factors are likely behind us, it stated.

According to the brokerage, the country’s Box office collection (BOC) in 2024 was ₹118 billion, second only to 2023’s record BOC of ₹122 billion. Footfall dropped by 6% YoY. The year 2024 faced multiple constraints, including the Hollywood strike in 2023, which pushed back the release dates of many English movies, and Bollywood’s megastars did not have any movies released.

The general elections and the T20 World Cup also impacted the movie calendar. A 3% drop in BOC, given these circumstances, shouldn’t be too concerning, as per the brokerage view.

“2025 looks promising. The Hollywood slate is encouraging, with Jurassic Park, Avatar, Marvel, and Disney movies scheduled for release. Sikandar and Sitare Zameen Par will mark the return of Bollywood’s megastars to the box office. These films should restore the growth trend. The impact of OTT, if at all, hasn’t worsened,” JM Financial said.

Should you buy the stock after the sharp correction?

JM Financial estimates weaker-than-expected Q3 results and has also lowered its assumptions for new screen additions, which is driving an 8-10% revenue growth and a 15-16% EBITDA growth for FY25-27E. As a result, it has revised its target price for the stock to ₹1,600 per share, down from the previous target of ₹1,980.

Nevertheless, the new price target indicates a 45.45% upside for the stock from its current trading price of ₹1,100. “We estimate that the current market price implies a 24.5% occupancy over the next 10 years, which is conservative in our view. A 1% change in occupancy has a 17% sensitivity to our target price,” the brokerage said.

Another brokerage firm, Geojit Financial Services, has stated that the recent correction in the stock price has made it attractively valued. Therefore, it upgraded the rating on the stock to ‘buy’ with a target price of ₹1,437.

Earlier in December, Ventura Securities initiated coverage on PVR Inox stock with a ‘buy’ rating and a target price of ₹2,657 per share.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.