Shares of INOX Leisure have been witnessing a dreamy run this year so far even though multiple headwinds have kept investors nervous.
The stock has jumped more than 46 percent year-to-date (YTD) as of November 22 close against a 5 percent gain in the benchmark Sensex.
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.
After the September quarter earnings, brokerages such as Emkay Global Financial Services and Prabhudas Lilladher maintained their buy calls on the stock.
Emkay attributed INOX's Q2 poor show to the poor content of Bollywood. Prabhudas Lilladher said despite the subdued performance in Q2FY23, it anticipated strong back-ended recovery and expected footfalls in FY23E to be at par with the pre-pandemic base as the content slate for the near term is healthy.
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 November 22 close, it is 20% down from that level.
Analysts are optimistic about the stock and believe it can rise even further.
Brokerage firm Nirmal Bang Securities has maintained a 'buy' call on INOX Leisure stock with a target price of ₹636, implying a 23 percent upside, after the brokerage firm hosted the company at its investor conference on November 22 to discuss the current business situation as well as outlook.
The brokerage firm highlighted that after a see-saw performance in the first half of the current financial year (1HFY23), the film exhibition industry is witnessing stability, with consumers responding more positively to content, leading to current occupancy levels being between those of 1QFY23 (30%) and 2QFY23 (17%) in case of INOX.
"Most of the key operating parameters are also an average of 1QFY23 and 2QFY23 levels. The higher main advertising business seems to be running at surprisingly better (at least for us) levels despite low occupancy in 2QFY23. However, a full recovery in advertising revenue to pre-pandemic levels is at least 9-12 months away," said Nirmal Bang.
As per the brokerage firm, the company saw a strong comeback in 3QFY23 from bombed-out 2QFY23 levels largely because of movies like ‘PS-1’, ‘Kantara’ and ‘Drishyam 2’ and some spillover from ‘Brahmastra’.
With a likely good run expected from ‘Avatar-2’, the brokerage firm believes that 3QFY23 should close strong and occupancy should inch towards 3QFY20 levels of 27%.
"After a very weak 2QFY23 performance, we had cut numbers for both PVR and INOX and we believe that 3QFY23 is largely trending a bit above our expectations. We maintain our estimates for now. We believe that there is now normalcy and stability in the sector and can brush aside 2QFY23 as a one-off due to poor content," said Nirmal Bang.
"We continue to remain bullish on INOX with a buy stance and a target price of ₹636, based on an EV/EBITDA multiple of 12 times on Sept’24E EBITDA. We believe that content performance consistency will induce investors' confidence to buy," it said.
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 broking firms. These do not represent the views of MintGenie.
