>MULTIPLEX PREVIEW (KARVY)

Q1 FY10 has been an abnormal quarter for the multiplex industry as the producers' went on strike with respect to the revenue sharing issues. There was hardly any content being released for the first two months of Q1 FY10 with only a handful of off-beat movies being released. The multiplex operators tried to show alternate content at their properties but with no success as IPL and the general elections swept all the attention. To make matters worse movie producers from the Telugu and Kannada film industry also joined the strike called by the Bollywood film fraternity. As a result we expect sub-15% occupancies to be reported by the multiplex companies in Q1 FY10. Many multiplex companies operated below capacity by keeping
some of their screens shut for this time period.

■ The final settlement between producers and exhibitors….
The final settlement between the producers and exhibitors was reached only in the first week of June. According to the new agreement, the multiplexes will have to share 50, 42, 35 and 30 percent for the first, second, third and fourth week respectively for all movies and 52, 45, 38 and 30 percent respectively for all blockbuster movies that manage to collect more than Rs 175 mn only at the six leading multiplex chains.

■ Abysmal earning numbers expected in Q1 FY10….
We expect abysmal earnings for the multiplex companies in Q1 FY10 on the back of the abnormal quarter witnessed by the industry. We expect all companies across our coverage universe to report an operating loss in Q1 FY10. This will be due to the fixed costs like theatre rentals, employee costs, administrative costs and other operating costs which have to borne by the multiplex operators irrespective of the movie flow and quality of content.

■ Earnings cut for FY10E….
We have reduced our FY10E earnings estimates for all the multiplex companies under our coverage, keeping in mind the expected Q1 FY10 earning numbers and delay in launch of new properties and a budget-to-forget for the multiplex industry. For the record, no company under our coverage was able to launch any new property in Q1 FY10.

To see full report: MULTIPLEX PREVIEW