Prabhudas Lilladher's research report on Inox Leisure
INOL reported exceptional performance with top-line beat of 8% and pre INDAS EBITDA margin of 21.2% (PLe of 17.6%) buoyed by strong content. Despite ATP being at an all-time high of Rs229, footfalls were 6% higher than preCOVID base evading concerns that unduly high pricing is acting as a hindrance to admissions. Nonetheless, ad-revenue performance is still lagging (36% lower than 1QFY20) and management is hopeful of a recovery in 2HFY23E. Overall, this was the best ever quarter for INOL and we maintain our positive bias given 1) healthy content pipeline (minor blip in July) 2) encouraging commentary on ad-revenue recovery 3) strong screen opening outlook 4) noteworthy improvement in KPIs (ATP/SPH was 16%/19% above pre-COVID base) and 5) healthy BS (gross debt of Rs810mn; only national chain to be net debt free) Further, the announced merger with PVR is progressing well and an application with NCLT has been filed.
Retain BUY on the stock with a TP of Rs699 (arrived from swap ratio of 3:10 with PVR) after assigning EV/EBITDA multiple of 15.5x (no change) to the merged entity.
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