(Photo: Reuters)
(Photo: Reuters)

Inox’s revenue growth surprises, but catching up with PVR some way off

  • Inox Leisure’s one-year forward price-earnings multiple comes to around 21.8 times, compared with PVR’s 33.9 times
  • The film exhibition business did well, with films, such as Uri: The Surgical Strike, Kesari and Gully Boy, drawing in a large number of moviegoers

So far, people’s spending on entertainment is not showing any sign of constraint, if one checks out the revenue trends of movie exhibitors. Even a seasonally weak quarter due to students’ exams has not played spoilsport. Revenues of Inox Leisure Ltd increased 48% from a year earlier to 478.8 crore in the fourth quarter of FY19, due to decent growth across all business segments.

The film exhibition business did well, with films, such as Uri: The Surgical Strike, Kesari and Gully Boy, drawing in a large number of moviegoers. Inox Leisure also managed to raise net ticket prices. Occupancy rates increased from 26% a year ago to 31%. Given a fillip by this and by the reduction in the goods and services tax rate to 18%, net box- office collections increased.

Besides, some of the films had a prolonged stay at the box office, resulting in better margins. Inox Leisure’s Ebitda (earnings before interest, tax, depreciation, and amortization) margin during the fourth quarter increased from 13% a year ago to 20.2%.

This has also been aided by a healthy increase in spending on food and beverages (F&B). F&B spends per head rose to 73 in the quarter, up 9% from a year earlier. Also, advertising revenues rose on the back of rising ad minutes. “Inox’s focus on F&B and advertising are paying off very well. Net F&B revenue grew 58% YoY to 120 crore, boosted by the company’s efforts toward higher conversion rates and selling more items by way of combos," Yes Securities Ltd said in a report.

Furthermore, in FY19, the exhibitor added 82 screens and plans to add a similar number of screens in the coming year. The premium-screen count, too, has been on the rise and accounts for about 8% of the company’s total screen count. In a few years, Inox Leisure plans to increase this to about 15% of total screens.

Some of these numbers reflect in the stock price, but catching up with bigger rival PVR Ltd seems like some way off. This past year, the Inox Leisure stock rose 8%, compared to PVR’s gains of 22%. “We believe consistent outperformance for Inox on metrics such as spend-per-head and advertising, will narrow its gap with PVR," said Elara Securities (India) Pvt. Ltd in a client note.

Based on Bloomberg analysts’ estimates, Inox Leisure’s one-year forward price-earnings multiple comes to around 21.8 times compared to PVR’s 33.9 times.

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