We recently met Siddharth Jain, Director (and promoter), and Alok Tandon, CEO, of INOX Leisure. If there is no serious wave 3 of Covid, then INOX Leisure is set for a strong recovery aided by pent-up demand and a large pipeline of major movies. Meanwhile, the balance sheet can support expansion. Some of its initiatives such as refreshing F&B offerings with a new menu and partnerships with ITC and delivery & reservation apps along with screening of alternative content would help the brand evolve from just a film exhibitor to a more integral part of consumer lifestyle. We remain upbeat on INOX’s structural story; retain ‘Buy’ with a TP of Rs 547. Covid wave 3 remains a key risk and variable to watch out for.
Promising movie pipeline: Sooryavanshi has opened the floodgates, raking in more than Rs 2.5 bn worldwide, and is an indicator of the pent-up demand. H2FY22 should also benefit from major regional as well as Hollywood movies. Pent-up demand is attributable to consumers returning to screens after a gap of about two years. More release dates are being announced, and we expect at least one big-star film every month.
Outlook: Pent-up demand – The stock has cooled off over the past few weeks by ~30% in the wake of the Omicron breakout. The multiplex association estimates Rs 40–60 bn collections in 2021, versus Rs 20 bn in 2020. Ad revenues should bounce back with a lag of two quarters. Smaller players have seen significant impact from Covid, giving more room to large players such as INOX to grow. Producers too have been sitting on content for a long time, and we are seeing more release dates being announced. Broadcasters such as Sun TV and ZEEL are also lining up strong content. Given the strong revival in demand, innovations by INOX, not to mention consolidation tailwind, we maintain ‘BUY/SO’ on the stock.