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Published on 19/09/2019 9:41:28 AM | Source: Equirus Securities Ltd

Update On Inox Leisure Ltd by Equirus Securities

Strong operating performance in 1QFY20; Maintain Long

Inox Leisure’s (INOL) 1QFY20 revenues grew ~19% yoy to ~Rs 4.9bn (+2% vs. EE) led by strong performance on all fronts: Box-office (+19% yoy), F&B (+18% yoy) and advertising (+18% yoy). Overall footfalls for the quarter grew ~11% yoy mainly led by strong footfalls in new properties while comparable footfall growth declined ~5%. Comparable EBITDA at Rs 888mn was up ~6% yoy (+5% vs. EE) as comparable EBITDAM contracted ~212bps yoy/ 216bps qoq led by a 34% increase in employee expenses (led by annual hike, bonus and screen additions). We update FY20/FY21E EPS by -43%/-30% to factor in IND-AS 116 changes. We roll over to a Sep’20 TP of Rs 339 (vs Jun’20 TP of Rs 363 earlier) set at 25x TTM P/E (unchanged, excl. IND AS 116 impact) and maintain our LONG rating.

 

Overall footfalls increase on good box office performance: INOL saw an ~11% yoy growth in footfalls led by higher footfalls in new properties as comparable footfalls declined by ~5%. Occupancy rates remained stable at 30% in 1Q (vs 31% last quarter) with NBOC improving significantly at 1QFY20-end. Average Ticket Prices (ATP) grew ~8% yoy to Rs 198 (adjusted for GST rate change in base quarter). With 2Q starting on a strong note (collections ― Super 30: Rs 1,317mn, The Lion King: Rs 1,261mn, Spiderman: Rs 845mn) and a strong content pipeline (Mission Mangal, Batla House, Dream Girl, WAR) in 2QFY20, we expect footfalls to remain strong. INOL added 21 screens during the quarter and is confident of reaching its FY20 target of 80 screens.

 

F&B revenues, advertising growth remain solid: F&B revenues jumped ~18% yoy as SPH improved by ~7% to Rs 81, the highest ever for INOL. Management aims to provide a good mix of food offerings to maintain F&B revenue growth in double digits. Contribution margin for F&B was flat at ~74.9% in 1QFY20 (1QFY19: ~75.6%). While advertising activity was impacted by the ICC World Cup and general elections, growth came in at 18% yoy. Comparable EBITDAM was in line with our expectations at 18% (vs 20.1% of 1QFY19).

 

Maintain LONG with a Sep’20 TP of Rs 339: Strong content performance and good execution of new properties is benefitting INOL with higher footfalls and increased F&B spends. We roll over to a Sep’20 TP of Rs 339 (from Jun’20 TP of Rs 363) set at 25x TTM P/E (unchanged, excl. IND AS 116 impact) and maintain LONG on the stock. INOL has been outperforming its larger peer in terms footfalls and advertising growth and if it continues to deliver, its valuation discount to its competitors would reduce.

 

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