Accumulate Inox Leisure: Edelweiss Research

Edelweiss Research report on Inox Leisure

"Inox Leisure announced 32.9% Y-o-Y and 7.9% Q-o-Q growth in its Q2FY07 consolidated net revenues to Rs 360 million, in line with our expectations. The growth in revenues was largely on account of higher number of seats in operation. There was an improvement of 620 bps in EBITDA margins (Q-o-Q) as the company had incurred loss in its distribution business in Q1FY07. However, there was a decline of 900 bps in EBITDA margins over Q2FY06 due to higher entertainment tax payout and rentals on new multiplexes. This was in line with expectations. PAT grew 23.4% Y-o-Y due to higher other income and lower tax rate. However, there was de-growth Q-o-Q because of high other income in Q1FY07. During the quarter, Inox opened a multiplex in Nagpur taking the total number of screens to 44. The acquisition of Calcutta Cinema Pvt Ltd. (CCPL) has not yet been consolidated in the numbers."

"We have increased our FY07 PAT estimates by 6.5% to account for higher than expected other income in the first half. Our EPS estimates for FY07 and FY08 are Rs 4.4 and Rs 6.5 respectively. The stock trades at P/E of 34.4x FY07E and 23.4x FY08E and EV/EBITDA of 19.1x FY07E and 13.1x FY08E. We maintain our ‘ACCUMULATE’ recommendation."