Kinepolis Group Even after a difficult 1Q, we remain optimistic for moviegoing demand

Although US box office enjoyed its best March in five years -despite concerns about the lingering impact of the Hollywood strikes- 1Q US box office revenue was down 6.9% y/y. The drop in sales was "well anticipated" following slate movements due to the recent Hollywood strikes. Recent data shows also that in France it was even more outspoken with visitors in 1Q24 down 10% y/y. This was despite the strong results from a handful of films -- "Dune: Part Two," "Kung Fu Panda 4," and "Bob Marley: One Love" -- demonstrating the resiliency of post-pandemic moviegoing demand across a variety of consumer demographics.

Although 1Q24E will be difficult for Kinepolis (7.3m visitors (KBCSe) versus 8.1m in 1Q23), we are comfortable with our new 35.2m FY24E visitors for Kinepolis (was 36.1m), which is expected to ramp to 39m next year amid various films that were delayed into FY25 due to the Hollywood strikes. While we remain optimistic around underlying moviegoing demand and the opportunity for significant profitability gains next year, we acknowledge the near-term film slate risk could create buying opportunities if the share price would overreact, as we still see nice upside versus our updated -DCF-based- Target Price of €53 (was € 55).