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After a record quarterly performance by both PVR Ltd. and Inox Leisure Ltd. in Q1 FY23, we believe that Q2 FY23 will be one of the weakest quarters in normal times (outside of the pandemic phase) due to poor consumer response to content released during the quarter.
Revenue is likely to be 25-30% lower vis-a-vis pre-pandemic Q2 FY20 and Q1 FY23. With occupancy levels likely in high teen to very low twenties, average ticket price and spends per head lower QoQ, fixed costs broadly at Q1 FY23 levels, Ebitda (Pre-Ind AS 116) will at best breakeven.
We expect both companies to report a net loss for Q2 FY23. One of the saviors for the quarter will likely be advertising revenue, which apparently held up well QoQ despite poor occupancy.
With costs having risen to normal levels and held on to, we see negative impact from high operating leverage in the business. The occupancy seen in Q2 FY23 is likely to be lower than that of every single Q2 during FY15-FY20.
While the ‘Boycott’ trends may have had an impact at the margin, we believe that the content too may have failed to connect with the audience. We believe that consumer tastes have shifted from pre-Covid times, with signficant exposure to quality content on OTT in various languages/genres.
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