UFO Moviez Research Report By Axis Securities

Ad revenue shines

UFO Moviez’ (UFOM) Q2FY17 ad revenue grew ~50% YoY, driven by healthy ad spends across government (up 94%) and private/ corporates (up 15% YoY). Ad revenue growth was driven by ~36% growth in ad volume (5.15 ad minutes/screen/show); ad realization improved ~13% YoY given benefits of differential pricing (based on movie content) for corporates, while government ad realization was stable YoY (DAVP realization). The management maintained its FY17 ad growth guidance at >30%, as H1FY17 ad revenue grew 29% YoY.

We expect UFOM to be the major beneficiary of ramp-up in ‘in-screen’ ad spends given (a) its successful strategy to aggregate ad inventory of single screens and (b) advanced technology offering more transparency and comfort to advertisers. Maintain BUY with TP of Rs 730 (8x FY18E EV/EBITDA).