Connplex Cinemas (CONNPLEX) — FY26 Result Thoughts
Posting some notes after going through the H2FY26 concall and investor presentation. Sharing for discussion, not as a recommendation.
Headline numbers look strong, but the composition deserves attention
FY26 revenue ₹147.5 Cr (+54% YoY), EBITDA ₹34.9 Cr (+33%), PAT ₹26.1 Cr (+37%). Screens went from 66 to 113. On the surface this looks like a clean compounder story.
But the revenue mix is :
1.Franchise fees / cinema making (EPC): ₹64.8 Cr (~44% of revenue)
2.Ticketing: ₹62.1 Cr
3.F&B: ₹7.8 Cr
4.Advertising: ₹2.9 Cr
5.VPF + convenience + others: ~₹7 Cr
Roughly 44% of the topline is one-time EPC revenue recognized at project completion when a new franchise screen is built. This is not recurring annuity revenue. It depends on the company continuing to sign and complete franchise screens at an accelerating pace. The day franchise sign-ups slow, this line resets sharply. The market appears to be valuing Connplex like a pure cinema operator; the P&L is closer to half-EPC, half-operator.
Margin trajectory is the bigger concern
EBITDA margin: FY25 27.45% → FY26 23.68% → H2FY26 20.46% PAT margin: FY25 19.85% → FY26 17.68% → H2FY26 15.61%
Employee cost nearly doubled (₹5.2 Cr → ₹9.95 Cr), other expenses including marketing went from ₹9.6 Cr to ₹17.8 Cr. Management’s framing — “investments for growth, will normalize” — is the standard response. But on the call, MD guided to “20% EBITDA is a good number” going forward. That’s a structural step-down from 27%, not a temporary blip. An asset-light franchise model with operating leverage kicking in should expand margins with scale, not compress them. Worth questioning whether the asset-light claim holds when SG&A is scaling linearly with screen additions.
Working capital
1.Inventory: ₹7.4 Cr → ₹22.8 Cr (3x, vs revenue 1.5x)
2.Trade receivables: ₹13.1 Cr → ₹21.3 Cr (+62%)
3.Current investments: ₹8.9 Cr → ₹66.2 Cr (this is IPO money parked in FDs, not organic)
OCF/PAT conversion needs verification when the annual report drops. The ₹76 Cr “net cash” position is essentially unutilized IPO proceeds.
Things that didn’t fully reconcile on the call
30 new screens in H2 × stated ₹2.5 Cr/screen build cost should give ~₹75 Cr in cinema-making revenue. Actual was ₹65 Cr. Multiple participants flagged this; management’s answer about “ongoing recognition” doesn’t square with their stated turnkey-completion policy. Either the per-screen realization is lower than guided, or there’s revenue spillover into H1FY27. Either way, model with caution.
Sub-lease arrangement (~₹9 Cr) is now pass-through — Connplex leases from developer, sub-leases to franchisee. Tax/GAAP treatment is fine, but it inflates topline without adding economic value. Adjust for it.
Management refuses segmental disclosure (EPC vs operations) citing “shared costs.” For a company with two structurally different business models — one project-based, one annuity — this is a real disclosure gap. Several analysts pushed; it was deflected.
Where the bull thesis genuinely holds
1.Underpenetration in tier 2/3 India is real and structural
230+ screen pipeline for FY27-FY28, FY27 guidance of 80-85 net additions
3.Near-zero debt, 70% promoter holding
Asset-light is capital-efficient when franchise conversion happens
5.FY27 content slate (Ramayana, Avengers Doom, Spider-Man, regional tentpoles) looks supportive
6.The FOFO/FOCO model genuinely enables faster expansion than P&L-heavy peers
Where I think it’s overplayed
1.“Smart cinema” / “India’s own multiplex” is positioning, not a moat. PVR-Inox, Cinepolis, can replicate any format. The moat claim needs evidence beyond branding.
2.Push into Bangalore and Hyderabad contradicts the tier-2/3 differentiation pitch
3.The non-DCI server / active LED process patent was mentioned but not quantified — needs more disclosure before assigning value
4.Cinema is content-cyclical. FY26 rode a 15-20% box-office recovery off a weak base. That tailwind doesn’t repeat annually.
5.“1,000 screens” is aspirational language, not guidance
On valuation
At current price, you’re paying a premium SME multiple on: (a) FY26 EPS of ₹15.15, of which ~40%+ comes from non-recurring EPC (b) Management guidance that explicitly steps margins down to ~20% EBITDA (c) Pipeline conversion that has real execution risk (real estate, franchisee dropouts)
The “long-term story” is fine. The price is doing the work that the recurring earnings can’t yet do. For a microcap with two halves of listed-entity track record, this is a faith trade more than a numbers trade right now.
My take (not advice)
Long-term thesis is narrower and more cyclical than the deck communicates, but not broken. Things I’d want to see.
H1FY27 showing recurring revenue share moving toward 55-60%+
EBITDA margin stabilising at or above 22% (not the 20% management is signalling)
Inventory and receivables growing in line with revenue, not 2-3x
Cleaner reconciliation between screens added and EPC revenue recognised
Some form of segmental disclosure.
Disclaimer - Invested and biased.Please do your own due diligence. Posting for discussion.
