Mr. Jinesh Joshi- Research Analyst at Prabhudas Lilladher
Though Jan and Feb were a near wash out, March turned out to be a blockbuster month with release of movies like The Kashmir Files (TKF) and RRR. Buoyed by healthy footfalls (up 19.4% QoQ) Inox is expected to report pre IND AS EBITDA margin of 7.0% while PVR is expected to report a modest loss due to cost normalization. On the broadcasting side, ad-environment continues to remain a bit soft as FMCG ad-spends have been impacted by RM cost inflation. We expect ZEEL to report 6.4% YoY growth in domestic ad-revenue coupled with a one-time fillip in income from theatrical success of TKF and Valimai (co-produced by Zee Studios).
As far as luggage sector is concerned, demand environment continues to remain robust despite a minor hiccup in Jan due to Omicron. While RM environment continues to remain inflationary; VIP has taken a price hike of 5% in mid-March while Safari should benefit from price hike taken towards end of 3Q. We expect GM of 48.0%/36.9% for VIP/Safari respectively.
We prefer Safari, Inox and Nazara amongst our mid-cap coverage universe. S Chand is our result pick given strong tailwinds from school re-openings. Price hike of 5-10% across product portfolio and benefit of COVID free sales season after a gap of 2 years will result in a turnaround in FY22 (modest profit of Rs123mn after being into losses for last 3 years).
Multiplex: While Jan & Feb (1st half) proved to be relatively dry on content front, NBOC's for Bollywood and Hollywood genre stood at ~Rs6,490mn (only 7% lower sequentially despite presence of 3rd wave) as March turned out to be a blockbuster month with releases like TKF and RRR. In addition, response to regional content was also good as movies like Valimai, Bheemla Nayak and Radhe Shyam crossed Rs1bn barrier in 4QFY22. Aided by strong content, we expect footfalls to be at 14mn and pre Ind-AS EBITDA loss of Rs242mn for PVR. For Inox, we expect footfalls of 11.2mn with a pre Ind-AS EBITDA margin of 7.0%.
Content slate for near term is extremely healthy with movies like KGF-2, Jersey, Heropanti-2, JayeshBhai Jordar, Bhool Bhulaiyaa-2 in pipeline. We believe 1QFY23 can be a blockbuster quarter due to bunching up of releases and full elimination of occupancy caps. Maintain BUY on PVR (merged entity TP of Rs2,272 based on 15.5x FY24 EBITDA) and Inox (implied TP of Rs681 based on swap ratio of 3:10).
Broadcasting: While TV ad-volumes have declined marginally by 1% in Jan-22 YoY due to Omicron impact, trajectory in Feb and March was positive. Nonetheless, the overall ad-environment continues to remain a bit soft as FMCG ad-spends have been impacted by RM cost inflation partially offset by rising spends from new categories like start-ups, crypto, real money gaming companies, and E-com.
We expect ZEEL to report 6.4% YoY growth in domestic ad-revenues after reporting a 3.1% YoY decline in 3QFY22. Overall, we expect 3.5% YoY growth in top-line with 21.2% EBITDA margin. We maintain our 'BUY' rating on ZEEL with a TP of Rs413 as the overhang over merger with SPNI has ended with Invesco withdrawing the EGM requisition.
Travel & tourism: Samsonite's Asia sales for Jan/Feb 2022 (acts a lead indicator for VIP/Safari's performance for 4QFY22) remained relatively steady versus 39.3% decline recorded in 4QCY21 when compared with 4QCY19. Samsonite's Asia performance indicates that demand has not deteriorated meaningfully despite presence of 3rd wave in Jan. As such, we do not foresee a major pullback in revenue for VIP/Safari in 4QFY22. We expect VIP/Safari's top-line to grow by 62.2%/58.6% YoY with GM of 48.0%/36.9%. We maintain BUY on VIP with a revised TP of Rs 825 (earlier Rs769) as we increase our target P/E multiple to 45x (earlier 42x). Maintain BUY on Safari with a TP of Rs1,264.
Excluding the last 10-days of March, non-suburban PRS traffic stood at 185.2mn in 4QFY22 as compared to 235.3mn in 3QFY22 indicating that IRCTC may end the quarter with ~117mn odd tickets. We expect IRCTC's revenues to increase 3.5% QoQ to Rs5,593mn as full impact of resumption of cooked meal services is expected to play out with EBITDA margin of 49.8%.
Recently, MoR announced that in trains that are plying with regular train numbers, 2nd class accommodation will be earmarked as reserved or unreserved as was the case during pre-pandemic period. Consequently, we have realigned our ticketing volumes estimates resulting in 8.9%/10.4% EPS cut for FY23/FY24 respectively. Maintain HOLD with a DCF based TP of Rs727 (earlier 802).
Gaming: We expect Nazara's top-line to increase 39.1% YoY on account of growth in ESports as offline events gained traction due to decline in COVID cases. Nonetheless, we expect growth headwinds in Kiddopia to sustain as benefits from DataWrkz acquisition is yet to play out. Earlier guidance of 35-40% revenue growth for FY22 with EBITDA margin of 13-15% remains intact.
During 4QFY22, Nazara made 2 investments in gaming focused VC firms like Griffin Gaming Partners and BitKraft in order to leverage their network to secure deal flow for future M&A, establish relationship with investee companies of the fund and explore co-investment opportunities into highly sought after founders/companies. We believe this investment can pave way for acquisition opportunity in the Freemium segment. We retain 'BUY' with a DCF based TP of Rs2,550.
Radio: While ad-volumes are expected to sustain momentum with the exception of Jan, yields will continue to remain under pressure. We expect ENIL's topline to decline 9.8% YoY due to limited on-ground events and soft performance in radio business due to Omicron impact. On the other hand, MBL's top-line is expected to remain flat on YoY basis. We maintain 'HOLD' on ENIL/MBL with TP of Rs200/Rs24 respectively.
Education: While 3rd wave led to temporary disruption, normalcy resumed from Feb onwards as many states started physical classes amid declining COVID cases. S Chand is expected to report a strong seasonal quarter with top-line growth of 28.0% (first COVID free sales season after a gap of 2 years) while Navneet is expected to grow at 25.0% on a lower base. We maintain 'BUY' on S Chand with TP Rs159 and Navneet with a TP of Rs128.