Institutional Equities Film Exhibition Sector 2 May 2017 ‘Baahubali 2’ Augurs Well For FY18 Girish Pai ‘Baahubali 2’, which was released on 28 April 2017, has beaten all historical records in the Indian Head of Research film industry by clocking gross box office collection (GBOC, revenue prior to entertainment tax
[email protected] being deducted) globally of Rs5.2bn over three days (Friday, Saturday and Sunday) based on media +91-22-3926 8017 reports. This includes domestic GBOC of ~Rs4bn and ~Rs1.2bn in overseas markets (of which 60% came from North America). This marks a tremendous start to FY18 for the two film exhibition players, PVR and Inox Leisure, which will benefit from the very high occupancy rate, higher ATP and also higher bargaining power vis-à-vis advertisers. Unlike FY17, which was impacted by insipid content (except for a late flourish from ‘Dangal’), we believe FY18 could be a great year with the start provided by ‘Baahubali 2’ and a slate of blockbusters that are likely to be released in the rest of FY18 (Exhibit 2 provides the slate of movies in FY18). We are positive on the film exhibition sector (see sector report Indian Film Exhibition Sector- Oligopolistic Business In Its Infancy; GST To Lift Margins And RoIC). We believe that: (1) Indian multiplex industry is an oligopoly (top four players control ~70% of screens) and will remain so as entry barriers are quite formidable and there are no substitutes. This industry structure will deliver steady revenue growth, and improve margins as well as RoIC over a long period of time.