>CINEMAX LIMITED: Disappointing on the margins front… (ICICI DIRECT)

On a consolidated basis, Cinemax reported its results for Q4FY10, which were above our expectations. The topline was at Rs 44.8 crore against our estimate of Rs 42.8 crore. The company recorded a topline growth of 32.3% YoY while it declined 24.5% QoQ. The decline was primarily due to the seasonal effect. The YoY revenue growth was led by higher number of screens under operation. The company disappointed on the margin front. The EBITDA margin came at 9.4%, a decline of 2047 bps QoQ and 260 bps YoY. It declined due to higher theatre rent, which increased by 72.9% QoQ to Rs 9.32 crore and higher other operating expenses. PAT stood at Rs 4.4 crore, aided by higher other income of Rs 4.0 crore and negative tax of Rs 3.1 crore.

■ Highlights of the quarter
The company did not roll any new property during Q4FY10. However, it added two new screens and 670 seats at the Ghatkopar property. With this, the company ended FY10 with the total count of properties at 28 with a total of 90 screens and seating capacity of 24,539. Occupancy for Q4FY10 stood at 26% as compared to 27% in the last quarter. The ATP improved to Rs 128 as compared to Rs 126 in Q3FY10.

The company reported other income of Rs 4.0 crore and E-tax reversal of Rs 3.1 crore. Had other income not been at these levels and tax reversal, the company would have reported a net loss for Q4FY10.

Valuation
At the CMP of Rs 49.0, the stock is trading at 17.1x FY11E EPS of Rs 3.4 and 11.9x FY12E EPS of Rs 4.1. We have valued the stock at 14x FY12E and arrived at a target price of Rs 58, implying an upside of 18%. We upgrade our rating on the stock from ADD to BUY.

To read the full report: CINEMAX LIMITED