Wonderla Holidays 2QFY2016 results have come in ahead of our expectations. The top-line growth was strong due to healthy growth in footfalls and increase in average realization. Further, a favorable operating performance led to a higher PAT growth for the quarter.
Strong top-line performance, led by healthy growth in footfalls: The companys top-line for the quarter grew by a healthy ~26% yoy to `43cr, mainly due to healthy growth in footfalls. Overall park footfalls grew by 7% yoy. An increase in average realization also contributed to the revenue growth.
Higher PAT on back of strong operating performance: The company reported a robust PAT growth of ~86% yoy to `12cr, on the back of strong top-line and operating performance. The operating performance was aided by lower advertising and marketing expenses, which declined by 19% yoy. This expense head benefitted from the base effect as the festival season (when promotional expenses tend to be higher) falls in the third quarter this year while it fell in the later part of the second quarter last year. Lower other expenditure also contributed towards better margins, during the quarter.
Outlook and valuation: India’s young demographic profile and increasing discretionary spends are expected to benefit the entertainment industry in the country. Also, the addition of a new park in the company’s portfolio and expected increase in contribution from other segments like F&B, resort, etc will drive growth for the company, going forward. Further, the company has negative working capital and negligible debt on its balance sheet. However, we believe that with the recent up move in the stock, all the positives have been captured. Hence, we recommend a Neutral rating on stock.
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