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Buy This Net Debt Free Multiplex Stock For Good Returns Suggests ICICI Direct
Inox Leisure operating approximately 100 multiplexes and 681 screens in over 54 cities is a pan-Indian multiplex chain. The company faced severe pressure amid the Covid outbreak and is now swiftly recouping the losses. In the 1-year period, the company's stock price has moved from Rs. 267.6 per share as on May 4, 2021 to Rs.493 as in the pre-opening session today i.e. gains of 84%. Likewise, looking into the rapidly recovering footfalls and the quarterly results, brokerage firm ICICI Direct has recommended the stock as a 'Buy' for a target price of Rs. 670. This considering the current market price of 493 equates to returns of nearly 36%
Here's all the brokerage says about the stock:
Q4 Fy22 financials as highlighted by the brokerage
First and foremost as iterated in the brokerage report, " Inox Leisure is the only national multiplex, which enjoys a net debt free balance sheet".
-Revenue at the firm inched higher 7.2% YoY to Rs. 317.7 crore in the period under review. There is an increase in box office revenue up 14% QoQ.
-EBITDA came in at Rs. 14 crore, with margins at 4.5%. On reported basis, EBITDA is placed at Rs. 78 crore, with margins at 24.6%.
Key investtment triggers
-Strong content slate line up to drive recovery in footfalls/revenues
- Benefits of permanent saving in costs (ex-rental) by 8-10%, given the
rationalisation measures
- Merged entity (PVR Inox) will benefit from scale of expansion, faster growth
trajectory and other revenues/cost synergy.
Buy for a target price of Rs. 670 per share
The brokerage mentions that the stock price of the multiplex entity "has grown by around 77% over the past five years (from around 278 in May, 2017 to around 493 levels in May, 2022). We maintain BUY rating on the company and value Inox at Rs. 670 i.e. 15x FY24E EV/EBITDA. Higher implied target multiple is owing to overall merger led benefit"
Disclaimer
The stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.
