ICICI Direct’s research report on Inox Leisure
Q4FY18 revenues came in at Rs 323.6 crore, up 12.2% YoY and better than our expectations of Rs 315.9 crore on account of strong ATP growth of 10.9% YoY, which more than compensated for 2.8% YoY decline in footfalls (Padmavat did not release in four states, where Inox has ~20-22% of their total screens). Spend per head (SPH) grew 13.6% YoY to Rs 67 (vs. our expectation of 10.4% YoY). Net box office collections came in at Rs 189.5 crore, up 6.0% YoY, aided by ATP that came in at Rs 193 for Q4FY18. F&B revenues came in at Rs 77.7 crore, continuing to grow handsomely by 18.4% YoY, driven by SPH growth as well as lower GST rates. Ad revenues came in at Rs 33.2 crore, up 58.9% YoY (our estimate: 47.4% YoY growth) EBITDA came in at Rs 43.9 crore vs. estimate of Rs 42 crore owing to strong operating leverage. Hence, EBITDA margins came in at 13.6%, better than our estimate of 13.3% Reported PAT came in higher at Rs 57.7 crore, which included Rs 53.7 crore exceptional benefits in terms of taxation benefits of earlier years. There was also a one-time provision towards claims for reimbursement and impairment loss, totalling Rs 10.4 crore. Adjusted PAT at Rs 14.4, was ahead of our expectation of Rs 11 crore.
Inox strong growth trajectory has been the key driver of the operating leverage led earnings. The ad growth of 30%+ for the last four quarters has been very impressive and has outperformed PVR. On the valuations front, Inox, which is trading at 10.9x FY20E EV/EBITDA, is at ~25% discount to PVR. However, given the strong traction in ad revenues, we expect the discount to narrow eventually. We maintain our BUY recommendation and value the stock at 12.8x FY20E EV/EBITDA (15% discount to target EV/EBITDA multiple of PVR) to arrive at a target price of Rs 360/share (earlier Rs 335). We continue to prefer Inox over PVR.
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