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Wonderla Holidays Ltd Research Report - 16th Dec 2015

Miscellaneous | Published on Aug 31st 2015


New amusement park at Hyderabad to boost footfalls: We expect Wonderla Holidays to report a healthy growth in footfalls (~18% CAGR over FY2015-17E) with it setting up a new amusement park in Hyderabad, which would be operational in FY2017. The company also has plans to venture across other parts of India to cater to a wider audience. In its first year of operation in Hyderabad, we expect the company to achieve ~7 lakh footfalls with lower utilisation of ~19%. Going forward, we expect the company to be able to report strong footfalls growth on back of increase in utilisation. Further, we expect the existing parks in Kochi and Bengaluru to post a ~4% CAGR over FY2015-17E. Moreover, the company has a proven track record and is expected to consistently increase its average realisation (realisation CAGR of ~10% over FY2009-15). The company is expected to incur strong cash flows and achieve higher assets turnover due to lower capex requirement, as most of the rides are manufactured at the in-house plant. Huge potential for F&B segment to grow: Apart from ticket sales, the company also generates income from food and beverage (F&B) sales, and product sales at its amusement parks, which contribute by almost 25% to the company’s total revenue. As per a report by CARE Ratings, global amusement parks draw 60-65% of their revenues from other segments (non-ticket sales). Since FY2009, the company’s revenue from other segments has increased from 15% to 25% and we expect such contribution to rise further. Company to benefit from higher occupancy rate at Wonderla Resort and turnaround at the operating level: Over the last three years, Wonderla Resort’s occupancy rate has increased significantly from ~30% to ~45%. Also, Wonderla Resort has turned around at the operating level in FY2015. Increase in footfalls at the Bengaluru park is likely to further boost growth for Wonderla Resort. Moreover, we expect occupancy rate as well as profitability to rise, going forward. 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. With the company’s stock price having corrected by 20-22% from its all time high, the company now poses as a good buying opportunity in our view. At the current market price, the stock trades at a P/E of 21.3x its FY2017E EPS. We initiate coverage on the stock with a Buy recommendation and target price of Rs322 (25x FY2017E EPS), indicating an upside of ~17% in the stock price from the present levels.

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CMP 275
Target Price 322
Investment Period12 Months

Stock Info

MCAP BSE (Rs in Cr)2,252.40
MCAP NSE (Rs in Cr)2,253.53
P/E (x)41.53
EPS (Rs.)9.60
BV (Rs.)71.33
Div Yield (%)0.50
FV (Rs.)10.00
P/BV (x)5.59
EV/Sales (x)10.89
EV/EBITDA (x)26.62

Shareholding Pattern (%)

Public & Others9.0
Grand Total100.0

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