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Buy Inox Leisure; target of Rs 275: ICICI Direct

ICICI Direct is bullish on Inox Leisure has recommended buy rating on the stock with a target price of Rs 275 in its research report dated September 05, 2018.

September 18, 2018 / 01:06 PM IST
 
 
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ICICI Direct's research report on Inox Leisure


We met the management of Inox Leisure to understand the current state of the F&B issue and business strategy of the company ahead. The management indicated that F&B issue seems to be fading away now due to favourable judgements on similar petitions in Madhya Pradesh, Telangana and Jammu & Kashmir. Major multiplex players have taken selective F&B price moderation in Maharashtra to mitigate public outrage. The screen addition guidance has been revised upwards to 65+ screens in FY19 vs. earlier guidance of 59 screens on account of better visibility. The company also guided for 5-7% ATP growth and 20%+ growth in advertisement in FY19. They indicated that while inorganic opportunities are available in the market, they are cautious given the high valuations demanded and would focus on organic screen additions.


Outlook


We believe the F&B issue is behind now and Inox is staring at another strong year with an exciting content pipeline. On the valuations front, Inox, which is trading at 8.8x FY20E EV/EBITDA, is at ~27% discount to PVR. However, given the strong traction in ad revenues, we expect the discount to narrow eventually. We upgrade the stock to BUY recommendation and now value it at 10x FY20E EV/EBITDA (20% discount to target EV/EBITDA multiple of PVR) to arrive at target price of Rs 275/share. We continue to prefer Inox over PVR.


For all recommendations report, click here


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first published: Sep 6, 2018 04:49 pm

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