Inox Leisure Initiating Coverage Research Report By Motilal Oswal

We believe that INOL is rightly-placed to enter the next phase of growth. With Satyam’s acquisition, company has improved its presence in North India. This will result in superior bargaining power with advertisers, leading to higher earnings growth. We expect INOL’s revenue and PAT to post 29% and 169% CAGR over FY15E-17E. We believe that an improvement in operating metrics will lead to better return ratios, and RoCE and RoE are expected to improve from 8.3% to 17.7% and 2.8% to 13.7% respectively over FY15E-17E. Further, INOL owns six properties valued at INR5b which can be monetized in the form of sale and leaseback arrangements for acquisition purposes. The stock trades at a PE multiple of 25.8x and 15.0x FY16E and FY17E EPS respectively. We value INOL at a PE multiple of 20x FY17E EPS (implied EV/EBITDA multiple of 9x FY17E EV/EBITDA), arriving at a target price of INR240.We initiate coverage on the stock with a Buy rating.

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