Is PVR Stock at Rs. 1149 the Right Buy? A Comprehensive Analysis

When considering the purchase of PVR shares at the current price of Rs. 1149, it is important to evaluate the broader market context and specific industry conditions. This article will analyze the current status of the entertainment sector, the potential correction in the PVR stock price, and provide expert insights for investors.

The Current Market Context

The entertainment industry is projected to face a slowdown over the next 4-5 months, with the expected impact on Q1 results due to recent lockdowns. This situation is likely to result in a correction in the PVR stock price, which is estimated to trade between Rs. 800-850 over the next 2-3 months.

Why Now is Not the Best Time to Invest

Given the current scenario, it is advised to avoid investing in PVR shares at this time. The government is not expected to give permission to open cinemas in June and July, and possibly not in August. Moreover, even post-lifting of restrictions, social distancing norms may continue, leading to lower occupancy rates. Additionally, the last three months of closure have increased expenses related to rent, staff salaries, and maintenance, making 2020 an unfavorable year for cinema owners. In the first quarter, they did not earn any income, and this period may result in significant financial challenges.

Opportunities for Future Investment

There are opportunities to benefit from this market condition by waiting for a drop in the share price to about Rs. 775-800. This could be a part of a long-term investment strategy. Expert analysis suggests accumulating shares at around Rs. 850, considering the margin of safety needed due to the uncertainties of the impact of the lockdown on future earnings.

PVR's Historical Performance and Future Prospects

PVR has demonstrated positive returns in past cycles and could be considered for a long-term investment. As a nation, we have a strong affinity for cinema, and this craze is likely to increase, with movies becoming more accessible and affordable. Family outings to the movies are expected to rise, enhancing footfall at cinemas. The company has taken proactive measures by invoking force majeure to reduce obligations, which should help in reducing their losses. While the current share price at Rs. 1149 may seem high, accumulating at Rs. 850 can be a safer bet, accounting for potential future losses and changes in public behavior.

However, it is crucial for investors to conduct thorough due diligence and research before making any investment decisions. Personal opinions should not be taken as investment advice, and investors are encouraged to assess their own financial capacities and strategies carefully.

Keywords: PVR shares, entertainment industry, stock correction