INOX Leisure announced its current financial year's September quarter (Q2FY23) earnings on October 19 which was on the weaker side.
The company reported revenues at ₹381 crore, with EBITDA standing at ₹3 crore and a loss of ₹22 crore for Q2FY23. INOX saw an occupancy rate of 17% in the said quarter.
"The second quarter of FY23 was impacted by the inconsistency in the content value chain, proving the importance of great quality content yet again," said Siddharth Jain, Director – INOX Leisure.
Jain indicated that the road ahead might be better as the content pipeline looks attractive. "The spectacular content pipeline, the festive fervour and our consistent rigour will certainly mark a celebratory third quarter for us,” said Jain.
The stock opened nearly a percent lower on October 20 and traded in the red for the most part of the day.
The stock hit its 52-week high of ₹622.30 on August 4, 2022. It saw some profit booking after that and now, as of October 19 close, it is 17% down from that level.
Brokerage firms, however, have faith in the stock as they believe the coming quarters will see the company earning profits.
Brokerage firm Nirmal Bang Equities has a buy call on the stock with a reduced target price of ₹636 from ₹720 earlier even as it considers Q2FY23 numbers as a one-off disappointment.
"After considering Q2FY23 as a one-off disappointment, we continue to remain bullish on INOX with a buy stance. However, we have toned down our operating metrics to arrive at a lowered target price of ₹636 from ₹720 earlier, valuing it at EV/EBITDA multiple of 12 times on Sept‘24E EBITDA. We have cut our estimates for FY23/FY24/FY25 largely due to lower revenue (lower occupancy)," said Nirmal Bang.
Emkay Global Financial Services expects a nearly 35% upside in the stock. The brokerage firm has a buy call on the stock with a target price of ₹695.
Emkay attributed INOX's Q2 poor show to the poor content of Bollywood. It has broadly maintained its estimates for the next two financial years while remaining watchful of content acceptance.
"Weak content, particularly Bollywood, is the culprit for the poor performance. However, this is not the first instance of a poor, stretched performance. In the past too, content has bounced back after brief periods of underperformance," said Emkay.
"Consequently, we broadly maintain our FY24/25 estimates while remaining watchful of content acceptance. We maintain a buy with an unchanged target price of ₹695 (Sep-24 Pro-forma EBITDA). Downside risks will arise if the content quality remains sub-par," said Emkay.
Brokerage firm Prabhudas Lilladher has retained a buy call on the stock after the Q2 numbers.
The brokerage firm expects INOX's sales and EBITDA CAGR of 21% and 25%, respectively, over FY23-FY25 and retain a buy on the stock with a target price of ₹652 (arrived from a swap ratio of 3:10 with PVR) after assigning EV/EBITDA multiple of 15.5 times to the merged entity.
"Despite the subdued performance, as the content slate for the near term is healthy with releases like Ram Setu, Thank God, Drishyam-2, Avatar and Black Panther in the pipeline, we anticipate strong back-ended recovery and expect footfalls in FY23E to be at par over the pre-pandemic base," said Prabhudas Lilladher.
"We increase our FY24E/FY25E EBITDA estimates by nearly 4% odd as we re-align our cost assumptions given strongly fixed cost control post-Covid," Prabhudas Lilladher added.
According to a MintGenie poll, an average of 17 analysts have a ‘strong buy’ call on the stock.
Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.