Buy INOX Leisure; target of Rs 239: Karvy

Karvy Stock Broking is bullish on INOX Leisure and has recommended buy rating on the stock with a target price of Rs 239, in its research report dated July 16, 2015.

July 24, 2015 / 06:27 PM IST

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Karvy Stock Broking's report on INOX Leisure
Inox has 372 screens in its kitty and is second largest player in Indian multiplex industry with market share of 22%. The company is planning to add 55-60 screens per annum for the next couple of years and has target of 557 screens by 2018. Out of the 60 properties expected to come into stream in 2016, 40% is expected to be in metros and 46% of screens are likely to be present in North & Western regions which will support the growth of Average Ticket Prices(ATP).

Better Movie Content & Increased Screening of Regional & Hollywood Movies to Drive Footfalls: We expect the occupancy to improve on the back ofimproving movie content with couple of Salman Khan & Shahrukh Khan movies lined up in FY16E and FY17E along with Hollywood movies. With Satyam cinemas coming into fold, which is one of the few properties which has higher occupancy level compared to pan India level, along with better content is expected to drive footfalls. Footfalls are likely to increase from 41.1 mn in FY15 to 55 mn in FY17E and grow at CAGR of 16% for FY15-17E and occupancy level is likely to be at 26% & 27% for FY16E& FY17E respectively.

Valuation and Outlook"Inox is the second largest player in the Indian movie exhibition industry and is narrowing its gap with the industry leader PVR on most of the metrics. We value the company on the basis of EV/EBITDA and assign multiple of 10x and arrive at target price of Rs.239 with “BUY” rating for period of 9-12 months representing an upside of 20%. We have given a premium to the valuation considering the Inox’s market position in movie exhibition business and stronger balance sheet. In movie exhibition industry, EV/EBITDA valuation for the multiplexes ranges in the band of 9-13 times", says Karvy Stock Broking research report.

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