Maintain ‘buy’ on Inox Leisure with TP of Rs 305

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INOX Leisure (INOX) reported Q4FY20 revenue dip of 22.4% y-o-y in line with our estimate, whereas Ebitda slid 64% y-o-y, less than our estimate (of a 70% dip) owing to rental savings in March (lockdown). PAT loss, however, stood at Rs 25m owing to a one-time tax write-off of Rs 688 m. The lockdown led to a 22–27% fall across NBOC, F&B and ad revenue in Q4FY20. Despite a challenging quarter, INOX registered FY20 revenue/Ebitda/EPS (non-Ind AS) growth of 12%/7%/2%, benefitting from screen expansion (10% YoY) and low financing cost. The company will raise Rs 750 m in debt and has Rs 1.2bn in treasury shares to navigate the tough times. While we are cognisant of the challenges in the near term, we remain confident of the long-term multiplex story and also draw comfort from INOX’s strong balance sheet, capex moderation for FY21 and ample liquidity support.

Net box office collection (NBOC) decreased 24.4% y-o-y owing to ~29% YoY dip in footfall. Similarly, F&B revenue slid by 24.5% y-o-y, despite 6.8% growth in SPH. Ad revenue, too, faced the brunt of the lockdown (in the backdrop of a slowing economy), down 20% y-o-y. Adjusting for Ind AS 116, INOX’s Ebitda tanked 64% y-o-y, leading to an Ebitda margin of 9.4% against 20.3% in Q4FY19. FY20 screen count stood at 626, with 58 screens opened during the year (including 17 in Q4FY20).

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We expect multiplexes to commence operations gradually from June 2020; unavailability of popular content, however, is likely to keep occupancy low in the initial few weeks. Maintain ‘buy’ with a TP of Rs 305 (18x FY22E EPS).

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