Inox: Among top two in multiplex space… :: ICICI Securities

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Among top two in multiplex space…
We recently met the management of Inox Leisure to get a better insight
into trends in the multiplex industry and growth prospects that lie ahead
for it. Inox is the second largest player in the multiplex space with ~361
screens across 92 properties in 50 cities. The company plans to add
about 100 screens in the next two years. Apart from organic growth,
there have been a couple of acquisitions viz. Fame Cinemas & Satyam
that also bolstered its expansion process. Owing to its strong property
portfolio, Inox has been able to demonstrate exemplary revenue, EBITDA
& PAT CAGR of 37.1%, 55.2% & 74.4% CAGR, respectively, in FY12-14.

Though ATP has remained in the range of | 155-165, occupancy growth
from 23% in FY11 to 28% in FY14 and a higher number of screens has
driven the growth for Inox. The management is now strongly focusing on
advertising revenues that stood at | 49.5 crore for the company vs.
| 140.0 crore for PVR. The company deployed a dedicated sales team to
sell its ad inventory and adopted innovative measures of differential ad
rates as per movies and duration of the contract. Inox is expected to be a
direct beneficiary of the gradual recovery in economic activity that would
increase the disposable income of people and drive its topline.
High quality content, strong property portfolio to be growth drivers
Investment inflows in the movie production space are set to multiply as
several movie studios such as Virgin Produced India & Fox Star Studio
plan to step up investments in Bollywood. High quality content with
heavy investments would increase the demand for movie related
entertainment. Inox, which has already displayed a footfall CAGR of
14.4% in FY11-14 would benefit from increased occupancies & rising
ATPs. Moreover, consistent property roll-out with a presence in key
locations would continue to drive its topline. Inox expects to add about
100 screens in the coming two years, thus reaching about 450 screens.
Advertisement revenues remain main focus
Inox is strategising to augment its advertising revenues by providing
advertisers various deals like pay per eyeballs and other innovative deals
with the help of a dedicated sales force. The company has earned about
| 49.5 crore in advertisements in FY14. Inox has about 38.6 million
footfalls (ex-Satyam), which gives advertisers an opportunity to reach the
target audience.
GST to bolster EBITDA margins
Inox has to part with a sizeable portion of its revenue as entertainment tax
to the government. Implementation of GST will bring about an EBITDA
margin improvement of about 200-400 bps depending upon the tax rate.

LINK
http://content.icicidirect.com/mailimages/IDirect_Inox_MgmtNote.pdf