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A good March quarter for Inox Leisure

LiveMint logoLiveMint 03-05-2017 Pallavi Pengonda

Inox Leisure Ltd’s results were adversely impacted on account of demonetization in the December quarter. One quarter down the line, things have improved. Footfalls rose 13% year-on-year for the March quarter, comparing rather favourably with a 3% decline seen in the measure in the December quarter. Occupancy rate increased year-on-year in the March quarter against a decline in the previous quarter.

Content performance was better than expected during the March quarter, say analysts. The top five movies—Dangal, Raees, Badrinath ki Dulhania, Jolly LLB and Kaabil—accounted for 51% of the company’s March quarter gross box-office collection revenues. In comparison, the top five films had accounted for 42% in the same quarter last year. The performance of Dangal, which had boosted the financials in the December quarter, helped March quarter results as well. In fact, Inox Leisure’s net box-office collection rose 18%, which is not bad at all, especially considering it had fallen 3% for the previous quarter. Revenue from other streams: food and beverages, advertising and other operating revenue, collectively increased at a slower pace of 9%.

The upshot: Consolidated operating revenue increased 14% in the March quarter compared to flat growth in the previous quarter. It also helped that Inox Leisure’s average ticket price increased 4% for the March quarter. Other expenditure as a percentage of revenue declined 340 basis points, facilitating a 72% jump in its operating profit to Rs25 crore. A basis point is 0.01%.

The net debt-to-equity ratio of 0.55 time as on 31 March, though higher compared to September- end, is comfortable.

The company had 468 screens at the end of fiscal year 2017 and intends to exit FY18 with 517 screens. This should fetch more revenues.

What of the Inox Leisure stock? It touched a closing high of Rs301.50 on 24 April and has marginally declined since then. Still, the stock has appreciated smartly by about 27% so far this calendar year.

This column has always maintained that content performance is a key parameter to watch for in multiplex firms such as Inox Leisure. In that context, the current quarter should bring cheer. Baahubali 2: The Conclusion got a phenomenal opening at the box office. This should reflect in the numbers for this quarter. While that augurs well, the stock trades at 32 times estimated earnings for this fiscal year, suggesting that most of the positives are priced in at these levels. Better advertising revenue growth, which stood at 8% in the March quarter, should boost sentiments for the stock.

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