The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E. Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.
Prabhudas Lilladher's research report on Inox Leisure
INOL reported decent performance with pre IND-AS EBITDA margin of 4.5% (PLe of 7.0%) due to strong recovery in the month of March. ATP and SPH have witnessed significant jump led by blockbuster content while management highlighted that ad-revenue (key margin lever) is expected to reach pre-COVID base within 2 quarters. After being marred by COVID for last 2 years, normalcy has finally set in and we expect the momentum to continue given 1) strong content pipeline (20 titles to be released this Friday including Dr Strange, a Marvel Studio production) 2) easing occupancy restrictions and 3) pick up in vaccination drive. Given improved operating environment, we expect revenue/EBITDA CAGR of 8.7%/10.5% over 4 years on a pre-COVID base of FY20.
Outlook
Retain BUY on the stock with a TP of Rs681 (arrived from the merger swap ratio of 3:10 with PVR) after assigning EV/EBITDA multiple of 15.5x (no change) to the merged entity.
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