Shares of multiplex chain PVR Ltd rallied nearly 7% in intraday trade on Thursday even as the broader markets faced another session of major selloff as the coronavirus pandemic spread further. The stock, which has nearly lost half of its value in the last one month due to shutdown of theatres in various states, saw investor interest return after two domestic brokerages upgraded the stock.
Kotak Institutional Equities and IDFC Securities have upgraded the PVR stock given the recent correction in the share price. Kotak now has a ‘buy’ rating on the stock compared with ‘reduce’ earlier with a target of Rs 1,800 per share. Meanwhile, IDFC Securities has an ‘outperform’ rating with a target at Rs 1,809 per share.
Kotak said that though Covid-19 would significantly impact the business “in the short term (say two months),” it expected it to bounce back thereafter, “led by pent-up demand and a packed line-up of movies”.
The brokerage cut PVR’s FY20-21 EBITDA (earnings before interest, tax, depreciation and amortisation) estimates by 10-23%, but retained its FY22 estimates.
Further, Kotak said PVR’s performance is largely linked to content quality and weak macro has a modest impact on the operating performance. Hence, recovery in footfalls is expected post-Covid-19 even in case of some incremental weakness in macro, the brokerage added. “That said, we note that advertising revenue growth could decelerate if the economy slows down further.”
Meanwhile, IDFC Securities believed that the recent price correction in PVR offers an extremely exciting entry point. The brokerage said the coronavirus pandemic would impact just 1-year cash flow and is not a potential permanent damage for the company. IDFC Securities has cut FY20-21 EBITDA estimates for PVR by 13-37%.
PVR shares closed the session on Thursday at Rs 1,192, up 2.6%, after hitting the day’s high of Rs 1,242. The stock had hit its 52-week high of Rs 2,121 on 20 February 2020 and, in a span of just one month, touched its 52-week low of Rs 1,045 on 16 March 2020.