Prabhudas Lilladher's research report on Inox Leisure
We keep our EBITDA estimates broadly unchanged but raise our target EV/EBITDA multiple to 9.2x (earlier 8.7x) as 1) footfalls are showing resilience to weakness in regional film market (evident in case of PVR) due to low screen exposure in South (22% of the portfolio is in South versus 34% for PVR) 2) diversity arising from screening of non-movie based content (music 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<https://www.plindia.com/ResReport/Multiplex-24-9-19-PL.pdf>, we believe INOL's premiumisation approach and strategic initiatives to boost advertisement and F&B sales is expected to yield rich dividends and further re-rating is on the cards (market leader PVR trades at a 21%/18% premium over our FY20/FY21 EBITDA estimates respectively).
Outlook
Maintain BUY with a revised TP of Rs476 (earlier Rs437).
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