CRISIL Research has assigned a CRISIL IER fundamental grade of '3/5' (pronounced ‘three on five’) to Inox Leisure (Inox). The grade indicates that the company's fundamentals are 'good' relative to other listed equity securities in India. Our fair value of the stock is Rs 201 a share. At the current market price of Rs 149 a share, our valuation grade is '5/5' indicating that the market price has strong upside from the current levels. The grades are not a recommendation to buy, sell or hold the graded instrument, or a comment on the graded instrument’s future market price or its suitability for a particular investor.

CRISIL Research expects Inox's revenues to grow at a two-year CAGR of 21% over FY15-17E to Ra 13 billion driven by higher footfalls arising from expanding screen network and growth in ancillary revenue streams (F&B and advertising). EBITDA margin is estimated to expand by 90 bps over FY15-17E on the back of growing contributions from the high-margin F&B and advertising operations. Implementation of GST may provide further impetus to margins, although we have not built in the same in our estimates. Growth in operating profit is likely to translate into a healthy two-year CAGR of 35% in adjusted PAT which, in turn, is expected to drive RoE expansion.

CRISIL Research has used the EV/EBITDA multiple method to value Inox. We have assigned a multiple of 9x, which is in line with the median one-year forward trading multiple of publicly-listed international multiplex operators, on FY17 EBITDA to arrive at a per share fair value of Rs 201 (adjusted for treasury shares).

Shares of the company gained Rs 6.3, or 4.27%, to trade at Rs 154.00. The total volume of shares traded was 7,768 at the BSE (12.13 p.m., Monday).