Multiplexes to post strong revenue growth in Q1, broadcasters to be muted

Q1 marks a full quarter of operations post pandemic for cinemas. This will reflect in financials of these firms, with likely revenue growth at 65-70% for PVR and Inox sequentially

Broadcasters and multiplexes are likely to report a contrasting set of financial numbers for the quarter ended June 30, 2022 (Q1), analysts tracking the media sector said in reports released over the past few days. 

The April-June period was among the strongest for cinemas, following a wave of pandemic-led closures in the past two years which led to a slump in business.

Brokerages, such as Emkay, Elara, and ICICI Securities, have all indicated that strong box-office collections will drive top-line growth for multiplexes, while near-term headwinds may result in muted revenue growth for broadcasters.

“For multiplexes, the good run of movies such as RRR, KGF 2, and Bhool Bhulaiyaa 2 will result in a robust performance on top line and profitability. For broadcasters, while ad growth will be seen on a benign base, margins will be lower amid higher content costs,” stated Bhupendra Tiwary, research analyst at ICICI Securities, in a report dated July 6.

Q1FY23 marks a full quarter of operations after the Covid pandemic for cinemas. This shall reflect in financial performance for these companies, with likely revenue growth in the region of 65-70 per cent for PVR and Inox on a sequential basis. Year-on-year figures are not comparable since the corresponding period last year was marred by the second wave of the Covid-19 pandemic.
 

While PVR and Inox are merging, for now, their numbers will be reported separately until the merger process is completed later this financial year. Analysts Naval Seth and Pulkit Chawla at Emkay Research said that the performance of regional, Hollywood, and select Bollywood films resulted in record box-office collections in Q1.

Apart from southern films and Bhool Bhulaiyaa 2, Hollywood movies — such as Doctor Strange in the Multiverse of Madness, Top Gun: Maverick and Jurassic World Dominion — did well in Q1, said trade analysts.

“Though higher collections of regional movies will not translate into proportional gains for PVR and Inox, they are still likely to report ticket sales well above pre-Covid levels, supported by increases in the average ticket price,” said Seth and Chawla in a report released on July 7.

Operating metrics, the two analysts said, would track well for PVR and Inox, thanks to stable ticket pricing and good spends per head on a quarter-on-quarter basis. This would be supported by a good recovery in ad revenue, they added.
 

For television broadcasters, however, the picture appears gloomy, with likely flat subscription growth and subdued advertising as steep inflation led to ad spend cuts by fast-moving consumer goods (FMCG) companies, which account for over 50 per cent of television advertising in the country.

“On the subscription front, the implementation of the new tariff order (NTO) 2.0 has been extended to November. Hence, the pricing power of TV players is likely to be limited until then. In terms of advertising, growth of 3 per cent year-on-year is expected for Zee and 2 per cent for Sun TV,” said Karan Taurani, senior vice president, Elara Capital.

In terms of subscriptions, Zee and Sun TV are expected to report negative and flat growth each, Dolat Capital said in a report dated July 5.

Elara, which also expects flat subscription growth for TV majors, said television was the first traditional medium to recover to pre-Covid levels in FY22. “But recent inflationary pressures have seen a negative impact on recovery in ad spends,” Taurani added.

Overall revenue is expected to grow 4.7 per cent and 23.2 per cent year-on-year for Zee and Sun TV, respectively. But operating profitability would likely be muted for all broadcasters due to content investments and lower ad revenue, he added.