Media - HITS ‘N’ MISSES Q2FY18: Tepid content continues to spoil the show India Equity Research | Media Though Q1FY18 started with a bang (Baahubali 2: The Conclusion reported INR10bn box office collection), it ended with a damp squib —Salman Khan’s Tubelight garnered only ~INR1bn versus INR3bn plus expectation. The dull performance extended in Q2FY18 as well with Toilet: Ek Prem Katha being the sole performer. Shah Rukh Khan’s Jab Harry Met Sejal belied expectations—INR750mn collection versus INR1bn plus estimate. Among Hollywood releases, Spiderman: Homecoming and War For The Planet Of The Apes did not meet expectations. Further, movies like Sultan (INR3bn plus), Rustom (INR1bn plus), Kabali and Pink had done quite well in base. Hence, we estimate LTL footfalls in multiplexes to decline to mid to high single digit in Q2FY18. \ Weak content to trip footfalls; muted ad growth sans blockbusters We estimate PVR’s and Inox’s LTL footfalls to dip 7% and 6% YoY, respectively, in Q2FY18 due to weak content. The sole saviour during the quarter was Toilet: Ek Prem Katha (INR1bn plus collection). Anticipation of good performance drives ad growth of multiplexes; absence of blockbuster category movies during the quarter is likely to keep ad growth muted. While we estimate PVR’s ad growth to be flattish, Inox is likely to report 30% YoY ad growth on a small base. Screen adds to boost multiplexes; competition to push up rentals We estimate PVR’s ATP to increase 4% YoY in Q2FY18 aided by price hike effected in Q1FY18 and mix change. However, Inox’s ATP growth is likely to be flattish. We expect the multiplex industry to continue to report decent overall growth in Q2FY18 on higher share of net box office collections led by addition of screens in the past 12 months. Other key developments: (a) premium categories such as Imax, Gold Class, ECX, Imax and 4DX to account for 25% of PVR’s screens; (b) rental costs of multiplexes to shoot up (up 8% YoY versus 5% YoY on per screen basis) due to aggressive competition; and (c) Q2FY18 being the first quarter of GST rollout is likely to face certain issues like working capital (refund of tax holiday movies may take time). Outlook: Star studded fare in Q3FY18 anticipated to buoy FY18 Q3FY18 has started with a bang led by Judwaa 2 (crossed INR590mn in 3 days). Further, star studded movies like Golmaal Again (Ajay Devgan), Rani Padmavati Abneesh Roy (Deepika Padukone), Tiger Zinda Hain (Salman Khan) and Secret Superstar (Aamir +91 22 6620 3141 Khan Productions) are anticipated to do well. Also, a strong line up of English movies [email protected] like Justice League (DC Comics), Star Wars and Jumanji 2 may also aid box office Rajiv Berlia collection. Pertinently, the base was strong with releases like Dangal, Dear Zindagi, +91 22 6623 3377 [email protected] Kahaani 2, Befikre and Rogue One (Star Wars movie) in Q3FY17. October 03, 2017 Edelweiss Research is also available1 on www.edelresearch.com, Edelweiss Securities Limited Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset. Media Table 1: Movies released in Q2FY17 Table 2: Movies released in Q2FY18 Total Total Movies (INR mn) Day 1Day 2Day 3 Collections Movies (INR mn) Day 1Day 2Day 3 Collections Sultan 365 373 317 3,004 Shubh Mangal Saavdhan 27 56 62 425 Dishoom 111 120 143 700 Jagga Jasoos 86 115 131 560 Rustom 141 164 199 1,274 Munna Michael 67 63 87 535 Mohenjo Daro 89 96 121 551 Mubarakan 52 74 104 556 Kabali 490 280 350 2,150 Jab Harry Met Sejal 153 150 155 643 Flying Jat 71 60 74 560 Toilet : Ek Prem Katha 131 171 213 1,342 Pink 43 77 95 547 Bareilly Ki Barfi 24 40 52 344 Baar Baar Dekho 68 77 67 312 Baadshaho 126 156 151 784 Total 9,098 Total 5,188 Source: boxofficecollection, Edelweiss research Chart 1: Nielsen Consumer Confidence Index ‐ India 140 134 128 (Index) 122 116 110 Q3FY16 Q2CY11 Q3CY11 Q4CY11 Q1CY12 Q2CY12 Q3CY12 Q4CY12 Q1CY13 Q2CY13 Q3CY13 Q4CY13 Q1CY14 Q2CY14 Q3CY14 Q4CY14 Q1CY15 Q2CY15 Q3CY15 Q4CY15 Q1CY16 Q2CY16 Q4CY16 Q1CY17 Q2CY17 Source: Industry, Edelweiss research Fig. 1: Rani Padmavati slated to release on Dec 1, 2017 Fig. 2: Tiger Zinda Hain to release on Dec 22, 2017 Source: Industry, Edelweiss research Edelweiss Securities Limited 2 Sector Update Table 3: Movie line up in Q3FY18 Release Date Movie Title Language Cast October 06‐Oct‐17 Chef Hindi Saif Ali Khan 06‐Oct‐17 Blade Runner 2049 English Ryan Gosling, Ana De Armas, Jared Leto 06‐Oct‐17 The Lego Ninjago Movie (3D) English Jackie Chan, Michael Pena 13‐Oct‐17 The Crucifiction English Sophie Cookson, Brittany Ashworth 19‐Oct‐17 Secret Supperstar Hindi Aamir Khan 20‐Oct‐17 Golmaal Again Hindi Ajay Devgan, Pareneeti Chopra November 03‐Nov‐17 Ittefaq Hindi Siddharth Malhotra, Sonakshi Sinha 03‐Nov‐17 Thor Ragnarok (3D Imax) English Chris Hemsworth, Benedict Cumberbatch 17‐Nov‐17 Justice League (3D Imax) English Gal Gadot, Jason Momoa, Amber Heard 24‐Nov‐17 Kadvi Hawa Hindi Sanjay Mishra, Ranvir Shorey, Tillotama Shome 24‐Nov‐17 Tera Intezaar Hindi Arbaz Khan, Sunny Leone, Aarya Babbar 24‐Nov‐17 Tumhari Sulu Hindi Vidhya Balan 24‐Nov‐17 Coco (3D) English Benjamin Bratt 24‐Nov‐17 Murder On The Orient Express English Johny Depp, Michelle Pfeiffer December 01‐Dec‐17 Rani Padmavati Hindi Deepika Padukone, Ranveer Singh 01‐Dec‐17 102 Not Out Hindi Amitabh Bachchan, Rishi Kapoor 01‐Dec‐17 He'S Out There English Yvonne Strahoviski, Justin Bruening 01‐Dec‐17 The Snowman English Michael Fassbender, Rebecca Furgeson 01‐Dec‐17 Daddy Home 2EnglishMel Gibson, Mark Wahlberg, Will Farrell 08‐Dec‐17 Parmanu ‐ The Story Of Pokhran Hindi John Abraham, Boman Irani, Diana Panty 08‐Dec‐17 Fukrey Returns Hindi Richa Chadha, Pulkit Samrat, Ali Fazal 08‐Dec‐17 Polaroid English Madelaine Petsch, Javier Botet, Kathryn Presscot 08‐Dec‐17 Paddington 2EnglishHugh Grant, Brandon Gleeson 15‐Dec‐17 Star Wars : Episode Viii ‐ The Last Jedi English Benecio Del Toro, Carrie Fisher, Adam Driver 22‐Dec‐17 Tiger Zinda Hai Hindi Salman Khan, Katrina Kaif 22‐Dec‐17 Jumanji (3D Imax) English Dwayne Johnson, Jack Black, Kevin Hart 22‐Dec‐17 Pitch Perfect 3EnglishAnna Kendrick, Elizabeth Banks, Brittany Snow 29‐Dec‐17 Father Figures English Owen Wilson, Ed Helms, Glenn Close, Jk Simmons 29‐Dec‐17 The Greatest Showman On Earth English Rebecca Ferguson, Zac Efron, Hugh Jackman, Source: Industry, Edelweiss research 3 Edelweiss Securities Limited Media Edelweiss Securities Limited, Edelweiss House, off C.S.T. 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Board: (91‐22) 4009 4400, Email: [email protected] Aditya Narain Head of Research [email protected] Coverage group(s) of stocks by primary analyst(s): Media DB Corp, DEN Networks, Dish TV India, Hathway Cable & Datacom, Jagran Prakashan, PVR, Sun TV Network, Zee Entertainment Enterprises Recent Research Date Company Title Price (INR) Recos 06‐Sep‐17 PVR Structural story remains 1,308 Buy intact; Visit Note 04‐Sep‐17 Sun TV IPL bonanza further leg up to 807 Buy Network ARASU digitisation; Company Update 30‐Aug‐17 Media H2FY18: Glad tidings anticipated; Sector Update Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe Rating Interpretation Buy Hold Reduce Total Rating Expected to Rating Distribution* 161 67 11 240 Buy appreciate more than 15% over a 12‐month period * 1stocks under review Hold appreciate up to 15% over a 12‐month period > 50bn Between 10bn and 50 bn < 10bn Reduce depreciate more than 5% over a 12‐month period Market Cap (INR) 156 62 11 Edelweiss Securities Limited 4 Sector Update DISCLAIMER Edelweiss Securities Limited (“ESL” or “Research Entity”) is regulated by the Securities and Exchange Board of India (“SEBI”) and is licensed to carry on the business of broking, depository services and related activities. 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