Accumulate Cinemax; target of Rs 54: Angel

Angel Broking has recommended accumulate rating on Cinemax India with a target of Rs 54, in its November 3, 2009 report.

“For 2QFY2010, Cinemax registered a Top-line de-growth of 10% yoy to Rs40.4cr (Rs44.9cr), below our estimates, despite an SPH increase of 3.3% yoy to Rs31 (Rs30). The Top-line decline is largely on account of a 5.4% decrease in the ATP to Rs122 (Rs129) and a 600bp decline in the occupancy yoy to 21% (27%). After the 2QFY2010 results, we have revised our Top-line estimates to factor in a weaker revenue traction from the company’s existing properties.”

“We expect the screen count to increase from the current 76 screens (including IMAX screen) to 93 screens in FY2010E. In terms of Earnings, we have downgraded our estimates significantly, to factor in lower operating Margins on account of, 1) higher distributor share, 2) higher rentals, and 3) weaker operating leverage and higher interest costs (we have modeled in higher debt to fund future expansion plans). We believe that, from here on, while execution risks (in terms of property roll-outs) and a heavy dependence on content (beyond their control) remain a cause of concern, the improving liquidity situation, strong movie line-up and the uptick in economic activity are key positives for the sector. At Rs48, Cinemax is trading at 10.6x its FY2011E revised EPS of Rs 4.5. Hence, we recommend an Accumulate on the stock, with a revised Target Price of Rs 54 (Rs59), owing to an Earnings revision,” says Angel Broking research report.

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