Good Morning Toasters!

Hii friends!! Happy weekend! Hope you use this time to rest & recharge. Domino’s is considering removing their services from Swiggy & Zomato, on account of unfair business practices, who have been accused of charging consistently high commissions.

In today’s issue, we cover PVR’s record quarter, with India’s foremost cinema chain delivering the best ever Average Ticket Prices and Spending Per Head numbers, as footfalls just about touch pre-covid levels.

Headline indices, Sensex & Nifty50 ended the weekend on the back of 6 consecutive days of gains, as investors churned sectors, moving into Banking & Auto stocks, as results & volume numbers indicated strength. FIIs for the first time in a very long time changed tract, recording consecutive days of buying.

Market Watch

Nifty 50: 16,719.45 | +114.20 (0.69%)
FII Net Sold: INR 675.45 crore

Sensex: 56,072.23 | +390.28 (0.70%)
DII Net Bought: INR 739.38 crore

Company News

PVR records the highest ever Average Ticket Price; what’s up and what do you need to know?

• In the strongest indication yet of the return of the good time (sorry Vijay), India’s largest cinema chain reported record numbers, with strong growth across Revenue, EBITDA & PAT
• Recording footfalls of ~25 Mn (pan-India) during the quarter, finally reaching just about pre-covid #’s, Net Box Office Collections (NBOC) grew 80.4% QoQ, while F&B Revenue increased by 90.2%, indicating strong demand
• Likewise, PVR recorded its highest ever Average Ticket Price (ATP) of INR 250 during the quarter, while Spending Per Head (SPH) also touched an all-time high of INR 134, with in-elasticity of demand and cinema chain’s perception of one of the few genuine out-of-home entertainment options intact (amidst the whole OTT argument)
• Ad-revenues (pre, during & post movies) also bounced back, increasing by 192% and yet remained much below pre-covid levels (on an absolute basis), as advertisers slowly warmed up to re-starting campaigns

Interesting! What else? Going forward?

• Cinemas, movies and going out for watching have seen a sharp rebound post a lull of 2 years, with audiences now willing to (clearly) go for movies consistently, and yet Bollywood / Hindi film cinema’s poor performance has overshadowed the actual #’s, with regional & Hollywood stepping in during the quarter
• Therefore for these #’s to sustain and/or surpass, good quality Bollywood content is key, with the strong line-up coupled with big budget movies, and a return of 8 week exhibition window should help in re-vitalising the Hindi Film Industry
• PVR, looking at increased demand, ATP & SPH, opened 14 screens during the quarter, with another 82 screens under fit-out, as the management reiterated their initial target of opening 120 screens during FY23
• Likewise, given improving menu options and increasing consumption patterns, the company indicated continued growth in ATP & SPH prices in the future, with the expectation of convergence of the two prices intact (when?)

Got it! Final thoughts? Stock perspective?

• The management indicated its merger with Inox cinemas was on track, with the company expected to file the merger scheme with NCLT, post which approval is expected in 5-7 weeks
• Likewise, the company expects a full recovery in Tier 1 cities in the next 6 months, with the disclaimer of no new waves/rise in cases disrupting operations and customer choices
• Post dropping during the 4th quarter of last (due to the third wave), PVR’s stock has performed strongly, while also closing ~1.1% in the green post results; Inox can be expected to deliver similar results, with the expectation of current demand trends to continue going forward

Keep a track?

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Around the World 🌎

• AMZN in a new zone – Amazon.com has acquired One Medical, an operator of primary care clinics, thus making its foray into the nation’s $4 trillion healthcare economy. This will help it to gain access to more than 180 medical offices in 25 U.S. markets and provide health benefits to the employees of more than 8000 companies, both in-person and virtual mode. Healthcare has always been a top priority for Chief Executive Andy Jassy who earlier built Amazon’s cloud business into a profitable venture and is also keenly interested in its multi-dollar advertising business
• The cryptocurrency – Industry experienced its biggest ripples when the Federal authorities filed the first ever insider trading case against a former Coinbase Global Co. product manager Ishaan Wahi and his brother and friend.  This has led to widespread fear among the people regarding what will happen if a crypto platform goes bankrupt which might lead to more legal and regulatory measures for such platforms
• Big guns need the dough – Typically,  for U.S. tax purposes,  a company deducts employee pay from its income and charges it as business expenses thus saving a big amount of taxes. However, ever since Congress denied this tax deduction,  the annual tax expenses of big companies like Tesla,  Howmet Aerospace, Ulta Beauty etc have considerably increased and even tripled in some cases. This has however not stopped them from hiring top executives with big packages because hiring and retaining talent is their top priority

Market News

Headline indices record the best week since Feb’21

• In a major reversal of the trend, India’s headline indices, the 30 share Sensex and Nifty50 recorded advances of 390 and 115 points respectively, advancing ~4% during the week
• Investors churned sectors, with Banks and Auto companies performing well, on the back of positive results updated by HDFC Bank and strong auto volume numbers indicating a return of consistent demand
• The market breadth, or a summation of the absolute # of stocks that rose/fell/remain unchanged, skewed in favour of bulls, with ~1781 stocks rising, 1541 falling, while 147 closings the week as they started
• While the broader indices (Mid & Small Caps) underperformed the headline index, the Mid-Cap Index has now risen for the 5th straight week (up 12%), indicating a reversal in mood, as investors spotted and invested in value stocks that underwent a limited fundamental change

Got it! Going forward? The expectation for next week? Technical, Fundamental, Macro? (yess broo)

• The second largest contributor to the Nifty50, Reliance Industries rose ~3.7% during the week, amidst expectations of a strong set of results, as profits from refining & gas realisations (increased brent price) and increased Average Revenue Per User in Jio were set to double quarterly profit for the company (at a consolidated level)
• From a technical analysis viewpoint, Nifty50 closed above its key resistance level (a barrier that limits prices from rising), with the chart now suggesting a clear runway till 17,000 OR when the next resistance level comes in, with the expectation of a strong bullish scenario if prices touch 16,800 in the coming days
• And finally, in stark contrast to the preceding (god knows how many) months, FIIs finally changed tract, participating in the rally on most days, with the likelihood of a continuation of the current trend contingent on their consistent participation to the rally
• The next weeks are all about the heavyweights, as Reliance’s results will be followed by banking heavyweights ICICI & Kotak dropping their quarterly #, cumulatively accounting for ~30% of the Nifty50’s weight, with the expectation of a strong couple of days (we can always hope?)
• Likewise, the Fed is expected to meet next week and announce the next set of rate hikes, amidst US inflation touching its highest level in 41 years, while also releasing GDP growth data, both of which will likely have some forbearance on Indian markets

What else caught our eye? 👀

Zinc is the hero of the hour (?)

• An increase in zinc prices and improvement in sales volume helped Hindustan Zinc Ltd. report an impressive net profit of ₹3092 crores for the June quarter,  up 55.9% YoY
• EBITDA at ₹5278 crore also rose 48.3% YoY due to better sales and a favourable exchange rate
• However, the cost of production also remains high due to higher coal prices, linkage coal supplies, and volatility in LME prices so investors are advised to keep track of LME prices going forward

Will Domino’s no longer be available on Zomato and Swiggy?

• Jubilant FoodWorks , India’s largest food service company operates 1567 outlets for the popular Domino’s Pizza and 28 for Dunkin Donuts
• It is seriously considering taking away some of its business from India’s widely used food delivery apps like Zomato and Swiggy due to excessive commission charged by them and their anti competitive practices
• It plans to shift more of its business to its in-house website and mobile app thus leading to higher profits

Educational Topic of the day

NOPAT

NOPAT stands for Net Operating Profit After Tax and represents a company’s theoretical income from operations if it had no debt (no interest expense). NOPAT is oftentimes used to compare businesses in the same industry and evaluate how a business is doing presently compared to its past performance. NOPAT paints a clearer picture of profits if the business had no debts, no interest expenses, and no non-operating income taxes.

Edited by Raunak Karwa

Let’s connect, I always love hearing from you. Hit me up at Raunak_Karwa on Twitter or Raunak.karwa@finlearnacademy.com