Buy Inox Leisure; target of Rs 330: ICICI Direct
ICICI Direct is bullish on Inox Leisure has recommended buy rating on the stock with a target price of Rs 330 in its research report dated February 06, 2019.
February 11, 2019 / 01:27 PM IST
ICICI Direct's research report on Inox Leisure
Q3FY19 revenue was at Rs 433 crore, up 32.9% YoY (vs. our estimate of Rs 418.6 crore), driven by healthy box office collections for the quarter (despite high base). Net box office collections for the quarter were up 29.3% YoY to Rs 242.9 crore, (vs. 25.5% YoY growth estimate) due to 26% YoY growth in footfalls (vs. 22% YoY expectations) while ATP grew 3.5% YoY to Rs 206 (vs. our expectation of 3.0% YoY growth to Rs 205). F&B revenues grew 45.4% YoY to Rs 106.3 crore vs. our estimate of ~39.9% YoY growth while ad revenues grew 38.3% YoY to Rs 55.7 crore vs. our estimate of 30% YoY growth• EBITDA came in at Rs 83.5 crore vs. estimated Rs 75.5 crore owing to strong operating leverage driven by higher ad revenues. Hence, EBITDA margins came in at 19.3%, better than our estimate of 18%• Reported PAT came in higher at Rs 36.5 crore, above our expectations of Rs 32 crore, given the beat on the operating front.
Strong screen guidance and subsequent rollout bode well for the company while robust traction in ad revenues is expected to aid margins, going ahead. Accordingly, we raise our EBITDA estimates in FY19 and FY20 by 10.7% and 9.7%, respectively. We are also enthused by the near debt free balance sheet of the company providing it space for strong growth ahead. On the valuations front, Inox, trading at 7.5x FY21E EV/EBITDA, is at ~33% discount to PVR. We expect the multiple discount to narrow eventually on account of strong traction in Inox’ earnings. We maintain our BUY recommendation and roll over our valuations to FY21E valuing it at 9x FY21E EV/EBITDA (25% discount to target EV/EBITDA multiple of PVR) to arrive at a target price of Rs 330/share.
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