Inox Leisure: The show struggles to go on
The Inox Leisure Ltd stock has so far lost 6.88% since the demonetisation announcement on 8 November. Note that by 8 November, the share price was already about 7% down since the firm announced a weak set of September quarter numbers in end-October.
The current quarter too is likely to see the company post a discouraging financial performance. Not without reason. Demonetisation has hurt the multiplex industry in general, with footfalls being impacted. Inox is not immune to the pain.
In the wake of the cash crunch, Inox saw ~25-30% lower footfalls in November, adversely impacting ticket sales and food and beverage revenue, pointed out a report from Sharekhan Ltd on 7 December. The firm has ~50-55% of its total properties in the metro and large cities. However, the remaining properties (45-50% of total properties) are located in small cities, where movie-goers purchase tickets in cash, added Sharekhan.
The company also derives revenue from advertising. Some advertisers are said to have postponed their ad spends since demonetisation. In any case, advertising revenues weren’t impressive before demonetisation. Inox’s advertising revenues for the September quarter came in at Rs23.8 crore (up 11.2% year-on-year). That’s double digit growth after the last three quarters, although it still lagged its peer PVR, which reported ~35% year-on-year advertisement revenue growth, said analysts from ICICI Securities Ltd in a post results report.
What offers some solace is that the content pipeline is not too bad. The performance of movies such as Shivaay, Ae Dil Hai Mushkil, and Kahaani 2 may offer some relief in this situation.
Despite the recent underperformance, the Inox Leisure stock has outperformed the benchmark Sensex so far this fiscal year. Currently, one stock trades at about 20.5 times estimated earnings for financial year 2018.
Screen additions are expected to fetch incremental revenues in the coming days. In its September quarter presentation, Inox said it will end FY17 with 480 screens. Further, it will add 289 screens beyond FY17, eventually leading to 769 screens. In an announcement to BSE last month, Inox said it has 446 screens across 113 multiplexes.
Content is a key factor to follow for the multiplex industry and Inox is no exception. It’ll be worth watching how movies such as Raees and Kaabil perform. The Inox stock is likely to take cues from that once the demonetisation impact fades.