homemarket Newsstocks NewsStocks To Watch In 2023 | Brokerages bullish on PVR, Inox following merger synergies
Stocks To Watch In 2023 | Brokerages bullish on PVR, Inox following merger synergies
The PVR-Inox merger could create a multiplex behemoth, with an increased bargaining power. The NCLT has already given an approval in January 2023 and with only few formalities left, the merger is expected to be completed in Q4 of FY23.
2022 was a year of consolidation for the media and entertainment sector. Within this space, two large players — PVR and Inox are being merged and should be on investor’s radar.
The merger could create a multiplex behemoth, with an increased bargaining power. The NCLT has already given an approval in January 2023 and with only a few formalities left, the merger is expected to be completed in the fourth quarter of this fiscal.
What synergies could this merger really draw?
Inox's advertising revenue per screen is at a 33 percent discount versus that of PVR in the pre-COVID year of the 2019-20 fiscal year. For the merged entity, expectations are of better yields on advertising, wherein Inox could come on par with PVR and the combined entity, may even command a further premium over the medium term.
Additionally, the market share could trend up as the combined entity may gain from smaller chains as well as single screens, that have struggled due to the COVID led closures. Management had earlier guided to add 150 to 200 screens every year as a merged entity.
In terms of ticket prices and spends per head too, Inox could move towards rapid premiumisation in line with PVR.
Hence with all the synergies flowing through, the street expects this acquisition to be a "big win-win" for the films industry and benefit both the players.
With a higher positive bias towards Inox, there is an expectation of Rs 150 crore of synergy benefit on the EBITDA of Inox.
Brokerages, like Elara Capital, Nuvama and ICICI Securities have a buy rating with target prices of about Rs 2,100 to Rs 2,600. Though Ambit Capital does have a sell call with a target price of Rs 1,434.
While for Inox, the target prices are anywhere in the range of Rs 600 to 760.
First Published: Jan 30, 2023 3:44 PM IST
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