Buy This Small Cap Entertainment Stock For A 27% Yield: Prabhudas Lilladher

Outlook and stock returns

On October 20, Thursday, shares of Inox Leisure closed at Rs. 513.05 per share after slipping 0.46% from its previous close. Over the past week, the stock has yielded positive returns of 2.44%, while over the past month, the stock has surged 4.6%. Over the past 1 year, the shares have returned 24.88%. Over the past 3 years, it has given 45.82% positive returns. In terms of multibagger yield, the stock has fallen 124.78% over the past 5 years.

Its ROE is negative at 34.57%, its 52-week low is Rs 337.70 and its 52-week high is Rs 619.35, respectively.

Topline/attendance 28%/39% below pre-COVID baseline

Topline/attendance 28%/39% below pre-COVID baseline

Revenue increased by 689% year-on-year to Rs3,741 million (Rs3,630 million for PLe) in 2QFY23 on a lower basis, but decreased by 36% on a sequential basis and by 28 % from pre-COVID baseline due to low content. ATP/SPH amounted to Rs215/Rs102 respectively with an attendance of 11.6mn (PLe of 11.5mn) and an occupancy rate of 17% (30% at 2QFY20).

Pre-IND-AS EBITDA at break-even levels

Pre-IND-AS EBITDA at break-even levels

Ind-AS Adjusted EBITDA loss was Rs 32m (PLe loss Rs 50m) vs. Ind-AS Adjusted EBITDA loss of Rs 644m in 2QFY22 and profit of Rs 1,235 million rupees at 1QFY23. The Ind-AS adjusted loss amounted to Rs214mn (PLe Rs242mn) against an Ind-AS adjusted loss of Rs677mn at 2QFY22 and a profit of Rs741mn at 1QFY23.

Con Call Highlights

Con Call Highlights

1) SPH increased by 6% QoQ to Rs102, mainly due to the introduction of special seasonal items, marketing initiatives and interactive cooking sessions across India with chefs.

2) Shareholder approval has been obtained for the merger program with PVR and the merger is expected to be completed by 4QFY23.

3) Inox entered the Srinagar market by opening 3 screens with 522 seats based on a management contract. The company will earn management fees while capital expenditures are incurred by the owner.

4) Acquisition of Luxe Cinemas with 11 screens and 2,688 seats in Chennai based on declining sales. The transaction will end in FY23E. This is a positive EBITDA property.

5) The reconciliation with ICC to present the matches of WC-T20 is done on the basis of revenue sharing (no fixed costs) but not exclusive. These matches generate higher ATP and occupancy than movies.

6) Ad revenue recovery from pre-COVID baseline was approximately 65%. Although advertising returns are improving, volumes have declined due to lower traffic.

Prabhudas Lilladher keeps his buy with a target price of Rs 652

Prabhudas Lilladher keeps his buy with a target price of Rs 652

The brokerage said: “In line with our expectations, Inox Leisure performed poorly and managed the pre-IND-AS EBITDA balance with losses of Rs214mn (PLe Rs242mn) at net profit level due to low content. Except for Thor and Brahmastra, no film was able to break through the NBOC barrier of Rs1bn at 2QFY23.”

He added, “Despite a moderate performance, as the short-term content slate is healthy with releases like Ram Setu, Thank God, Drishyam-2, Avatar and Black Panther in the pipeline, we expect a strong recovery back and forth. we expect the footsteps in FY23E to be down from the pre-pandemic base We are increasing our FY24E/FY25E EBITDA estimates by approximately 4% as we realign our cost assumptions given the strong control of fixed costs post COVID Excluding rental obligations which increased 3% per screen as escalations began, employee costs, energy and fuel and other overhead decreased 27%/3 %/21% respectively from pre-pandemic base at 2QFY23. keep BUY on the stock with a TP of Rs652 (obtained from a swap ratio of 3:10 with PVR) after assigning an EV multiple /EBITDA of 15.5x (no change) to the merged entity.”

Disclaimer

Disclaimer

The stock was picked from Prabhdas Lilladher’s brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.