Target: ₹214

CMP: ₹145.15

Since our initiating coverage on UFO Moviez India Ltd (UMIL) the stock had touched ₹174 (from initiation price of ₹112) and is currently 19 per cent up from initiation price. Despite the rally we believe that there is still significant upside potential that warrants a relook. We re-initiate with a BUY coverage for a price target of ₹214 (22x FY27E net earnings).

With Recent acquisition of TSR Films, the total number of screens has increased to 3,808 from 3,303 in Sept, 2023. Revenue is projected to increase from ₹396 crore in FY23 to ₹638.8 crore in FY27, indicating a 12.7 per cent CAGR growth.

Due to operating leverage, EBITDA is expected to rise significantly by 39.7 per cent CAGR to ₹121.8 crore. The net profit is expected to turn the corner in FY24 to reach ₹16 cr from a loss of ₹21 crore recorded in FY23. Post this, the PAT is expected to clock a 3 years CAGR of 32.2 per cent reaching ₹37.4 crore in FY27. EBITDA Margins and Net Profit Margins are expected to improve by 1,100 bps to 19.1 per cent and 190 bps (from FY24) to 5.9 per cent respectively by FY27.

Key risks: - Continued weakness in advertising and film-viewing footfalls; and termination of JV with Qube will have no material impact.

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