Buy Inox Leisure; target of Rs 260: ICICI Direct
ICICI Direct is bullish on Inox Leisure has recommended buy rating on the stock with a target price of Rs 260 in its research report dated October 23, 2018.
October 23, 2018 / 03:57 PM IST
ICICI Direct's research report on Inox Leisure
Q2FY19 revenues came in at Rs 365.3 crore vs. our estimate of Rs 346.5 crore, up 17.7% YoY, driven by healthy ad and F&B revenues growth during the quarter. Footfalls for the quarter grew 7.2% YoY while ATP grew ~5% YoY to Rs 195. Spend per head (SPH) grew 12.3% YoY to Rs 73. Net box office collections came in at Rs 206.4 crore, up 11.2% YoY. F&B revenues grew 41.4% YoY to at Rs 94.9 crore vs. our expectations of 34%YoY, aided by lower GST rates EBITDA came in at Rs 44.8 crore vs. estimate of Rs 41.9 crore owing to operating leverage. Hence, EBITDA margins came in at 12.3%, better than our estimate of 12.1% Reported PAT came in higher at Rs 12 crore, above our expectation of Rs 10.2 crore.
Strong screen guidance and its subsequent rollout (so far) bode well for the company. Moreover, the F&B issue and short-term hiccups faced by BMS exit are behind now. On the valuations front, Inox, which is trading at 8.6x FY20E EV/EBITDA, is at ~30% discount to PVR. However, given the strong traction in overall financials, we expect the discount to narrow eventually. We maintain our BUY recommendation and value it at 10x FY20E EV/EBITDA (20% discount to target EV/EBITDA multiple of PVR) to arrive at target price of Rs 260/share. We continue to prefer Inox over PVR.
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