Comments
Anand Rathi
Inox Leisure (Buy)
Target: ₹292
CMP: ₹227.75
While movie exhibitors will suffer in the short term and the pace of recovery will be slower, we believe they will rebound and gain from pent-up demand as home-sheltering subsides and people seek a communal experience on return of normalcy. With that in mind, we assume a lockdown in H1-FY-21 and subdued H2 occupancy.
With significantly reduced fixed costs (monthly ₹15-17 crore cash-burn; pre-covid-19: ₹70-75 crore), Inox’ cash balance ₹72 crore and credit available (₹75 crore) would be suffice for nearly 8-10 months without any revenue coming in. Also, it had treasury shares of ₹100 crore market value, which could be liquidated for exigencies and to acquire attractive distressed assets.
The charm of big screens will never fade; OTT, though, will co-exist. OTT cannot afford all films, or films at every price level. The prices it pays will always be lower. Small/mid budget films will not mind opening in OTT; and OTT requires content. A time will come when quality won’t matter for OTT, only content. Hence, content will have to be churned out. Such a situation, more or less, can be seen for quite a while in these uncertain times, as nobody knows how consumers will react. We believe that theatrical releases provide better opportunities to producers to generate RoIs, especially in case of big-budget movies.
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