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Inox Leisure Ltd>
  • CMP : 500.6 Chg : -3.0 (-0.60%)
  • Target : 720.0 (19.40%)
  • Target Period : 12-18 Month

04 Aug 2022

Blockbuster performance!

About The Stock

Inox Leisure is the second largest player in terms of multiplex screen count in India. Currently, the company operates 692 screens in 163 cinemas in 73 cities in India with an aggregate seating capacity of ~1.55 lakhs seats.

  • It is the only national multiplex which enjoys a net debt free balance sheet
Q1FY23 Results

Robust performance was led by strong box office recovery.

  • Reported revenue was at ₹ 582.3 crore, (up 83.3% QoQ) and ~18% higher than pre-Covid levels in Q1FY20. The reported box office revenue was at
    ₹ 353 crore (up 75% QoQ) and ad revenues of ₹ 30 crore (at 64% of pre Covid level). The company reported ₹ 164 crore of F&B revenues, up 89% QoQ, with SPH at ₹ 96 was up 11.6% QoQ. The footfalls were up ~67% QoQ at 18.4 million and ATP at ₹ 229 was up ~5% QoQ owing to slate mix
  • EBITDA (ex- Ind AS116) was at ₹ 123 crore with margins of 21.3% (better than pre Covid levels of 20%) given the strong box office performance. On reported basis, EBITDA was at ₹ 210.5 crore (margin of 36.1%)
  • The reported PAT was at ₹ 57.1 led by strong operating performance. The company reported PAT (ex-  Ind AS116) at ₹ 74.4 crore
What should Investors do?

Inox’ share price has grown at 19% CAGR over the past five years (from ~₹ 249 in August, 2017 to ~₹ 603 levels in August, 2022).

We maintain BUY rating on the company

Target Price and Valuation

We value Inox at ₹ 720 i.e. 15x FY24E EV/EBITDA

Key Triggers for future price performance
  • Strong content slate line up to drive recovery in footfalls/revenues
  • Benefits of permanent saving in costs (ex-rental) by 8-10%, given the rationalisation measures
  • Merged entity (PVR Inox) will benefit from scale of expansion, faster growth trajectory and other revenues/cost synergy
Alternate Stock Idea

Apart from Inox Leisure, we like PVR in the multiplex space.

  • A play on recovery of earnings of multiplexes
  • BUY with target price of ₹ 2300

Key Financial Summary

(Year-end March) FY19 FY20 FY21 FY22E 5 yr CAGR (FY17-22) FY23E FY24E 4 yr CAGR (FY20-24E)
Total Operating Income (| crore) 1,692.2 1,897.4 105.9 683.9 -11.0 2,295.9 2,684.5 9.1
EBITDA (| crore) 308.3 596.8 -172.3 71.7 -13.0 828.6 1,019.9 14.3
Net Profit (| crore) 133.5 15.0 -337.7 -239.4
EPS (|) 13.0 1.5 -30.0 -19.6 - 16.4 24.9 -
P/E (x) 46.3 413.0 -20.1 -30.8 - 36.7 24.2 -
Price / Book (x) 6.4 9.9 10.7 10.6 - 8.5 6.5 -
EV/EBITDA (x) 24.2 17.0 -58.8 140.8 - 12.0 9.7 -
RoCE (%) 19.6 9.9 -11.7 -5.4 - 14.2 16.9 -
RoE (%) 14.2 2.4 -62.5 -50.6 - 23.2 26.7 -
- - - - - - - - -
Source: Company, ICICI Direct Research

Key performance highlight and outlook

Strong quarter; strong line-up ahead…

Notably, Q1 revenues were 18% higher than pre-Covid levels in Q1FY20. The company has witnessed a strong Q1, led by superlative performances by KGF 2, Bhool Bhulaiyaa 2, RRR (residual collection), Doctor Strange, Vikram (Tamil) etc. Consequently, the footfalls were up ~67% QoQ at 18.4 million (6% above pre Covid levels) and ATP at
| 229 was up ~5% QoQ owing to slate mix. We highlight that content pipeline is very strong and there is high probability of strong collections in the coming quarters too. We bake in 77, 80 screens addition in FY23E, FY24E, respectively. Consequently, we build in footfall growth of 5% CAGR in FY20-24E to 80 million coupled with 4.5% CAGR in ATP to lead to ~10% FY20-24E CAGR in net box office revenues to | 1602 crore. F&B revenue CAGR is estimated at 11.5% over FY20-24E leading to a total of | 768 crore. Ad revenue is expected to take longer to recover. We expect ad revenue of | 200 crore in FY24E (~12% higher than FY20). We expect strong recovery in FY23 with all variables (except advertisement back to pre-Covid levels for the full year.

Liquidity strong; merger timeline on track…

As on date, the company has close to | 375 crore of gross liquidity, including undrawn limit of | 125 crore. Gross debt is | 81 crore. It also indicated that for the merger, they have filed for approval with NCLT and are now awaiting approvals (likely to take five to seven months). It also indicated that merger is on track to be completed in stipulated timelines.

Other highlights

  • Guidance: The company guided for 77 screens opening FY23, all funded through internal accruals. In Q1, 17 screen have been added and 60 screens are under fit outs. It indicated that ATP hike will be in line with inflations trends, while spends per head (SPH) will likely see growth of ~8-10%. It also guided that ad revenues would be back to pre-Covid run rate in H2FY23 given the strong content pipeline ahead and festive season
  • Others:
    • The company added that SPH growth is driven by a) stronger push, b) more menus to offer and c) higher point of sales via app, LED kiosk and delivery partners.
    • Furthermore, the company expects employee cost to inch up as it has ramped up hiring of operations associates. However, on per screen basis, it will be 7-8% lower than pre-Covid levels eventually


We believe that that with strong content pipeline, the recovery trend will continue ahead. Inox with strong balance sheet is poised to grow at superior rate. We maintain BUY and assign FY24E EV/EBITDA multiple of 15x, with a target price of | 720/share.



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