Inox Leisure Ltd. share price target

INOL's Ind-AS adjusted EBITDA loss of Rs334mn (excluding OI) was broadly in-line with our estimates of Rs378mn as rigorous cost cutting initiatives resulted in fixed opex burn of ~Rs100-120mn per month during the quarter. We expect burn rate to increase in the initial few months post re-opening as fixed costs like rent, CAM, and employee expenses will rise (as compared to the levels prevailing in lockdown) without sufficient corresponding rise in footfalls amid 1) occupancy caps and 2) hesitancy to visit multiplexes. In addition, in the initial phase, ATP & SPH is likely to be lower due to...

Inox' theatres continue to remain shut in Q2FY21E till date as cinemas were not allowed to reopen in Unlock phase 2 & 3. The management expects to receive permission to reopen theatres in Unlock phase 4. Inox maintained a guidance of 41 screens addition (86% of the work is complete) while we bake in 20 screen addition for FY21E and 70 screens addition in FY22E. Consequently, we bake in footfall growth of 2.8% CAGR in FY20-22E to 70 mn (69% decline in FY21 followed by sharp growth thereafter) coupled with 3% CAGR in net ATP to lead to 6.9% CAGR in FY20-22E (68% decline in...

INOL's performance was better than our estimates (Ind-AS adjusted EBITDA loss of Rs376mn versus our estimate of Rs505mn) as rigorous cost cutting initiatives led to a reduction in fixed monthly opex burn by 25%. We expect 1HFY21 to be a period of liquidity management as occupancy would remain negligible (was NIL in 1Q and is expected to be at 2.6%% in 2Q) with gradual recovery in 2HFY21 (average occupancy expectation of 17.5%). While management cited that content pipeline is healthy with 14 Hindi and 53 regional language films ready for theatrical release, rising instances of...

Valuation: Long trek to back normalcy, downgrade to Hold: We lowered our earnings estimates FY2021E/FY2022E due to a challenging environment in the view of COVID-19 and an anticipated delay in return of normalcy in multiplex business. However, in the long term, we remain positive on the stock, given its strong balance sheet (net debt free) and potential for healthy earnings growth considering India's movie-goers appetite for movies. The stock of ILL has moved up around 60% from its lows over one month and trading at 15x FY2022E earnings. We reduce our target multiples given multiple headwinds...

Inox Leisure's Q4FY20 performance was marred by Covid-19 impact along with weak box office collections in February. Footfalls declined ~29% YoY to 12.8 million (mn), partially offset by ~7% ATP growth that led net box office revenues to decline 23.2% YoY to | 218 crore. F&B; revenues declined 23.6% to | 94 crore with SPH at | 78, up 6.8% YoY. Ad revenues declined ~19% to | 35 crore. EBITDA (ex-Ind-AS 116) came in at | 34.9 crore, with margins of 9.4%, down 1077 bps YoY, impacted by negative operating leverage. On a reported basis, EBITDA was at | 110 crore, margin of 29.6%....

The Multiplex Association of India has suggested Enhanced Safety and Precaution plan for Cinemas encompassing health & hygiene norms, social distancing and F&B; sale. Leaving the adjacent seats empty, if implemented, will affect the occupancy up to ~25% as per the management. The weekend occupancy for PVR is ~52% while weekday occupancy is ~26%. This could undergo a change as some customers may prefer weekday viewing...

conclusion that the spread and containment of Covid-19 is far beyond our initial estimates. The rising number of Covid-19 cases in India, extended country-wide lockdown and gradual pace of relaxation even after 3 rd May are resulting in another round of estimate changes for multiplexes. We believe that sustained case increases across the globe and in India will continue to create a fear psychosis in the mind of consumers, which will keep them away from cinemas for a longer period of time. Global surveys (Exhibit 26) also...

The quarter's net box office collections were led by movies such as War, Housefull 4, Bala, Joker, Good Newwz, etc. Q4 has been strong so far with Tanhaji being a blockbuster. The content line up ahead includes Baaghi 3, Angrezi Medium, Sooryavanshi, Shubh Mangal Zyada Saavdhaan, etc. which should drive healthy box office collections ahead. We highlight that the management has maintained its guidance of 70 screens addition while we bake in 65 screen addition for FY20E. For FY21E and FY22, we build in 70 screens addition each. Consequently, we bake healthy footfall growth of...

INOX rewards' has already on boarded ~4mn subscribers. INOL has maintained its FY20 target to add 70 screens (YTD it has added 40 screens on net basis and 46 on gross basis). We now forecast addition of 70 screens for FY20 vs. 65 screens earlier and maintain addition of 70 screens in FY21. We fine-tune our FY20/21 forecast. We now forecast revenue/EBITDA CAGR of 17%/20.2% over FY19-21E. Given the uptick in the stock we now recommend HOLD (vs. BUY earlier) with new TP of Rs433 (Rs422 earlier) based on EV/EBITDA of 10x FY21E. Key Highlights and Investment Rationale...

concerts, sports leagues etc) which is boosting occupancy in lean periods (weekdays) 3) strong response to the newly launched loyalty program (~4mn patrons have already signed up in 2 months) which will result in consumer stickiness with no material impact on margins even in the near term and 4) strong screen addition pipeline (~1,018 screens are in fray to be opened post FY20E; as of 2QFY20 the figure was ~914 screens) which provides long term revenue visibility. While the stock has already appreciated by ~26% since our initiation report, we believe INOL's premiumisation approach and strategic...