Inox Leisure Ltd

BUY on decline
Target Price ₹ 442 CMP ₹ 371

Index Details Part of the USD $3 Billion Inox Group, Inox Leisure reported a
Sensex 40,083 blockbuster performance in Q4 FY19.
Nifty 12,021
• The Net Box Office Collections (NBOC) grew 50%YoY to Rs
Industry Entertainment
975 crore on the back of a 42.5%YoY growth in footfalls.
Increase in screen count to a total of 583 screens and
Scrip Details
strong content library contributed to more people visiting
the movies.
MktCap (Cr) 3,727
• F&B revenues grew 58.3% YoY to Rs 123 crores as the
BVPS (₹) 93.70 gross spend per head registered a growth of 12.1% to Rs 74.
O/s Shares (Cr) 10.29
• Refreshed advertising strategy led the advertisement
Avg Vol 1.3
revenues to grow at 29.5% YoY to Rs 43 crores.
52 Week H/L 382.6/189.6
Div Yield (%) 0.0 • It was in this very quarter that Inox became the first national
chain in the industry to be Net Debt Free, thereby proving

STOCK POINTER
FVPS (₹) 10.0
that it has the potential to grow aggressively without any
Shareholding Pattern stress on the balance sheet.
Shareholders % We reiterate Inox Leisure as a BUY with a Price Target of INR 442
Promoters 51.9 (8.5x EV/EBITDA of FY 22E), representing a growth of 24% over a
FIIs 11.2 period of next 18 months. Currently, the stock is trading at a CMP
MFs 21.3
of Rs. 371 (7.1x EV/EBITDA FY22E).
Public 15.7
Our optimism stems from the following:
Total 100.0
1. Aggressive organic screen rollout to 895 screens by FY22E
Inox vs. Sensex from the current 583 screens.
500.00
43000.00
40000.00
450.00
2. For FY20/21E the slate of content driven films is fortifying.
400.00
37000.00 350.00
Consequently, we have integrated healthy footfall growth of
34000.00 300.00 13% CAGR for FY19-22E coupled with additional screens
31000.00 250.00 and a relatively flattish trend in the ATP (Average ticket
28000.00 200.00 price) leading the way for a 16.2% CAGR in net box office
25000.00 150.00
collections to 1,533 crores by FY22E (from Rs 947 crores in
FY19.)
SENSEX Inox

Key Financials (Rs in Cr)

Net Adj EPS EPS ROE ROCE P/E EV/EBITDA

Y/E Mar EBITDA
Sales PAT (Rs) Growth (%) (%) (%) (x) (x)
2019 1,692 308 134 13.0 9.0 16.6 15.5 28.5 12.7
2020E 1,856 345 157 15.3 17.9 16.6 16.8 24.2 11.3
2021E 2,293 414 196 19.0 24.2 17.4 17.7 19.5 9.3
2022E 2,881 537 269 26.2 37.7 19.8 18.2 14.2 7.1
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 3. Strong content library helped in increasing the footfalls in FY19
thereby fueling revenues in the very segment. We expect the food
and beverages sales to grow at a CAGR of 25% from Rs 436 crore in
FY19 to Rs 852 crores by FY22E. Growth is expected to be
supported by an increase in spend per head (SPH) followed by an
enhanced F&B menu/services. Also, the interactive kiosks coupled
with a master chef curated menu is likely to spice up the F&B
revenues.

4. New property additions in marquee locations and overall

premiumization efforts are likely to reap benefits in terms of growth
in both advertisement volume and effective rate. Revenues are also
likely to grow on account of big budget movies that are expected to
hit the screens in the coming years linked with hefty ad budgets.
Thus, advertising revenues are expected to grow at a CAGR of 27%
to Rs 360 crore by FY22E.

5. With a stellar content slate ahead, the margins are set to remain
constant at 18.6% in FY22E while profitability is expected to improve
by 150bps to 9.3% in FY22E. Any operating leverage will be an
upside risk to our estimates.

6. ROE and ROCE too are expected to improve to 19.8% (+320 bps) and
18.2% (+270 bps), respectively. With future capex to be incurred
largely through internal accruals, the Free Cash Flow to the Firm
(FCFF) is expected to be Rs 11,404 crore and cash flow from
operations to be Rs 368.4 crore in FY22E.

-2- Tuesday 4th June, 2019

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 Financial story in charts.
Inox to have more aggressive screen rollout Vigorous footfalls to continue
1200 No of
screens
120 Footfalls in mn
1001
1000 926 895
846 100
771 770
800
691 80
625 654
583
600 516
464 460 496 60
420
400 372
40

200 20

0 0
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

* Includes acquisition of cinemas PVR Inox PVR INOX

Diminishing gap in occupancy rate Inox NBOC to exhibit a faster traction

40% Occupancy rate PVR CAGR :15% ; INOX CAGR:16% PVR CAGR :12.2% ; INOX CAGR:16.3%
es 3,000 PVR CAGR :15% ;
35%
2,500 FY16 to FY18 stagnant 2,315
due to degrowth in 2,088
30% 1,904
2,000 footfalls
1,635
1533
25% 1,500 1,124 1,247 1274
994 975 1060
20% 1,000 824 748 802
713
512
15% 500

10% -
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
PVR INOX PVR Inox

Inox in catch mode with PVR F&B revenues to see an imminent boom
Rs in cr 1200 Rs in cr 35%
120 220
SPH ATP 1053
958 30%
100 210 1000
87 89 91 871 853
78 200 25%
75 800 757
80 74
62 66 190 607 634 20%
60 55 58 600 550
180 466 476 15%
437
40 400 348
170 284 306 10%
266
20 179
160 200
5%

- 150 0 0%
FY15 FY16 FY17
i FY18 FY19 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

PVR INOX PVR (% of sales) INOX(% of sales)

PVR, LHS INOX, LHS PVR, RHS INOX, RHS

Source: Inox Leisure Ltd, PVR, Ventura Research

-3- Tuesday 4th June, 2019

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 Advertising revenues to continue the growth story Total revenues to remain upbeat
500 Rs in crore 14 3,000 Rs in crore
450 438 2,700
12
398
400
361
2,400
362
350 10 2,100
329
294
300 273 8
1,800
250 1,500
206 210
193 6
200 168 176 1,200
139
150 4 900
91 96
100 78 600
2
50 300
0 0 -
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
PVR INOX PVR(% of sales) INOX(% of sales)
NBOC F&B Advst Other Operating

EBITDA margins at par with PVR Inox PAT growth beat that of PVR

Rs in cr %
400 Rs in cr 10.0
1,000 937 25%
900 350 342 9.0
828
800 706 20%
294 8.0
300 269
700 7.0
586 250 234 6.0
600 537 15% 196
500 200 183 5.0
401 414 157
400 334 345 10% 150 125 115 134 4.0
313 308
300 98 95 3.0
200 100 82
200
190
146
210 . 5% 2.0
123
50 31
100 12 20 1.0
- 0% - -
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

PVR INOX PVR Margins INOX Margins PVR Inox PVR margins Inox margins

PVR Region wise screens Inox Region wise screens

East
30
East
87 North
North 123
230
South
258
South
126

West
247
West
253

North West South East North West South East

Source: Inox Leisure Ltd, PVR, Ventura Research

-4- Tuesday 4th June, 2019

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 ROE to witness a spurt Steady growth in ROCE

25 % %
ROE 30
ROCE
20 25

15 20

15
10
10
5
5

0 0
FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

PVR INOX PVR INOX

INOX at minimal gearing Inox’s screen rollout more aggressive

Debt / Equity
2.0 120% New screens as a % of total screens
(No of times)
1.8
1.6 100%
1.4
80%
1.2
1.0 60%
0.8
0.6 40%
0.4
20%
0.2
- 0%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20EFY21EFY22E
PVR INOX
PVR INOX
*Includes Acquisition

CFO to reflect an upbeat trend Free cash flow to rise again

2500.00
Rs. in crores 12,000.00
Rs. in crores

2000.00 10,000.00

8,000.00
1500.00

ES 6,000.00
1000.00
4,000.00

500.00
2,000.00

0.00 Source: Inox Leisure, PVR, V -

FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Source: Inox Leisure Ltd, PVR, Ventura Research

-5- Tuesday 4th June, 2019

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 Financial Projections
Y/E March, Fig in ` Cr FY19 FY20E FY21E FY22E Y/E March, Fig in ` Cr FY19 FY20E FY21E FY22E
Profit & Loss Statement Per Share Data (Rs)
Net Sales 1,692 1,856 2,293 2,881 Adj. EPS 13.0 15.3 19.0 26.2
% Chg. 10% 24% 26% Cash EPS 22.3 26.8 32.3 41.7
Total Expenditure 1,383 1,511 1,878 2,344 DPS 0.0 0.0 0.0 0.0
% Chg. 9% 24% 25% Book Value 84.5 99.8 118.8 144.9
EBDITA 309.1 345.0 414.5 536.7 Capital, Liquidity, Returns Ratio
EBDITA Margin % 18.3% 18.6% 18.1% 18.6% Debt / Equity (x) 0.1 0.1 0.1 0.0
Other Income 14.9 16.0 17.8 25.7 Current Ratio (x) 0.6 0.8 1.0 1.0
PBDIT 324.0 360.9 432.3 562.4 ROE (%) 16.6 16.6 17.4 19.8
Depreciation 95.5 118.8 136.9 160.0 ROCE (%) 15.5 16.8 17.7 18.2
Interest exp 23.7 7.3 3.4 0.8 Cash Yield (%) 4.8 2.1 2.7 4.1
Exceptional items 5.0 0.0 0.0 0.0 Valuation Ratio (x)
PBT 199.8 234.8 292.0 401.5 P/E 28.6 24.3 19.5 14.2
Tax Provisions 65.7 77.4 96.1 132.4 P/BV 4.4 3.7 3.1 2.6
Reported PAT 134.2 157.4 195.9 269.2 EV/Sales 2.3 2.1 1.7 1.3
Minority Interest 0.0 0.0 0.0 0.0 EV/EBIDTA 12.7 11.2 9.3 7.1
Share of Associate 0.0 0.0 0.0 0.0 Efficiency Ratio (x)
PAT 134.2 157.4 195.9 269.2 Inventory (days) 2 2 2 2
PAT Margin (%) 7.9 8.5 8.5 9.3 Debtors (days) 18 20 21 22
Distributor's share / Net Sales (%) 43.8 44.0 44.0 44.0 Creditors (days) 89 84 82 82
Tax / Sales (%) 33 33 33 33 Net working capital(days) -69 -61 -58 -57

Balance Sheet Cash Flow Statement

Share Capital 96.2 96.2 96.2 96.2 Profit Before Tax 199.2 234.8 291.6 401.5
Reserves & Surplus 773.3 930.7 1126.2 1395.4 Depreciation 95.5 118.8 136.9 160.0
Long Term Borrowings 55.0 41.7 42.0 30.0 Working Capital Changes 31.8 (22.9) (52.5) (35.9)
Deferred Tax Liabilities (Net) -8.8 -8.8 -8.8 -8.8 Others (131.5) (195.2) (193.7) (157.3)
Other Non Current Liabilities & LT Prov 81.1 15.8 18.6 22.1 Operating Cash Flow 195.0 135.6 182.3 368.4
Total Liabilities 997 1,076 1,274 1,535 Capital Expenditure (83.2) (184.0) (290.5) (311.3)
Gross Block 1511.9 1695.9 1986.4 2297.6 Other Investment Activities 15.5 16.0 17.8 25.7
Less: Acc. Depreciation 698.6 817.4 954.3 1114.3 Cash Flow from Investing (67.7) (168.0) (272.7) (285.5)
Net Block 813.3 878.4 1032.1 1183.3 Changes in Share Capital 0.0 0.0 0.0 0.0
Goodwill on consolidation 0.2 0.2 0.2 0.2 Changes in Borrowings (162.8) (50.2) 2.8 (25.3)
Non Current Investments 0.6 0.6 0.6 0.6 Dividend and Interest (23.7) (7.3) (3.4) (0.8)
Long term Loans & Advances 248.2 274.8 306.2 346.3 Cash Flow from Financing (186.4) (57.4) (0.6) (26.1)
Other Non Current Assets 3.5 3.5 3.5 3.5 Net Change in Cash & Cash Equiv (59.1) (89.9) (91.1) 56.8
Net Current Assets -69.0 -82.0 -68.4 0.9 Opening Balance 14.5 13.5 14.5 27.6
Total Assets 997 1,076 1,274 1,535 Closing Balance 13.5 14.5 27.6 38.4

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