Buy Inox Leisure; target of Rs 486: Prabhudas Lilladher

Prabhudas Lilladher's research report on Inox Leisure

INOL’s operational performance was ahead of our estimates with Ind-AS adjusted EBITDA margin of 16.8% (PLe of 13.4%) aided by strong content (5 movies crossed Rs1bn mark in 3QFY22). ATP/SPH at Rs226/Rs97 was 11%/20% higher than 3QFY20 (comparable pre-COVID quarter) indicating that recovery has been sharp. While onset of 3rd wave has delayed the recovery process and prompted us to cut our FY22 EBITDA estimates by 36% (Jan has been a washout so far) we keep our FY23/FY24 EBITDA estimates broadly intact amid 1) less severe nature of the virus and 2) pick up vaccination drive (~70% adult population is fully vaccinated). Further, in 3rd wave we have seen occupancy restrictions being re-imposed rather than outright closures (Delhi and Haryana are exceptions) indicating that recovery to pre-COVID levels will be faster this time around leading to sharp revival in box office revenues due to bunching up of releases.

Outlook

Consequently, we expect INOL’s FY23 sales/EBITDA to be higher by 14%/18% over the FY20 base. Maintain BUY with a TP of Rs486 (earlier Rs490) valuing the stock at 11x (no change) Sep23 EBITDA.