UFO Moviez, a digital cinema network and in-cinema advertising platform, is expected to post modest growth in advertisement revenues for the December quarter (Q3, FY2017) due to demonetisation. Revenues for Q3 likely declined on year-on-year basis, according to a brokerage.
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The company is scheduled to declare its Q3 results on February 2, 2017. The UFO Moviez stock closed at Rs 409 on Friday on the BSE, down 1.03 percent from its previous close.
"We forecast advertisement revenue to see a modest growth of 1.9 percent YoY impacted by demonetisation. We forecast in-cinema advertisement revenue to grow by 3.7 percent YoY lead by, a 7 percent YoY growth in the government segment," analyst Urmil Shah of IDBI Capital Markets & Securities said in a note on Friday.
"Further, due to decline in VPF revenue and hardware sales, we forecast over-call revenue to decline by 3.3 percent YoY to Rs 1,397 million (Rs 139.7 crore)," the analyst added.
In the corresponding quarter last fiscal (Q3, FY2016), the company had reported 14.8 percent rise YoY in advertisement revenues to Rs 40.6 crore. Its net profit and sales stood at Rs 19.7 crore and Rs 145 crore, respectively, for that quarter.
Business/revenue model
The company has three sources of revenues — film distribution income, leasing of digital cinema equipment to exhibitors, and advertisements (in-cinema). The revenue mix is ~45 percent from distribution, ~24 percent from lease and ~31 percent from advertisements (H1, FY2017).
The ad revenues have a potential to rise rapidly in multiplexes as compared to single-screens.
"The time of ad per show in single screens still lags behind the average ad minutes in multiplexes, which are nearly 4.5x that of single screens. As the ad minutes in UFO screens begin to increase, it will have a multiplier effect on revenues," ICICI Securities had said in a note in December 2015.
Revenues from commercials placed at cinema halls is a big money spinner. "The in-cinema advertisement revenues in India have grown from Rs 1.40 billion in 2011 to Rs 6.27 billion (Rs 627 crore) in 2015 according to KPMG – FICCI Indian Media and Entertainment Industry Reports. In-cinema advertising is expected to be one of the fastest growing advertising verticals in India," UFO Moviez said in its FY2016 annual report.
At the end of September 2016, UFO Moviez had 5,055 screens in India and 1,675 screens across West Asia, Israel, Mexico and the US.
Hindi films that were released during Q3 or at the end of Q2 included Dear Zindagi, Befikre, Ae Dil Hai Mushkil, Shivaay, MS Dhoni and Kahaani 2.
In 2015-16, the company digitally delivered 1,738 movies in 25 languages to 5,034 screens with an aggregate seating capacity of approximately 2.15 million viewers in India and in Nepal.
Caravan Talkies
The company has another business vertical, Caravan Talkies, which is an open movie viewing experience for India's rural population situated in media dark areas. "A sundown show is played at villages typically at a weekly marketplace. Each caravan visits seven villages a week in a close circuit. Caravan Talkies remains operational for eight to nine months a year except during monsoons," according to UFO Moviez.
Other sources of income for UFO Moviez include Club Cinema (movie screenings of recently released films in clubs and community centres at private screens) and NOVA Cinemas (under which local entrepreneurs get to own and operate NOVA CINEMAS branded theaters in various part of the country).
