Steady quarter; future growth to be driven by improvement in footfall
Wonderla Holidays posted steady performance for Q1FY19, on back of increase in footfalls. Net revenue improved by 1.5%, while EBITDA and PAT margins expanded by 1,267bps and 638bps, respectively driven by improved operational efficiency. Going forward, footfalls are expected to improve across all its three parks i.e. Bangalore, Hyderabad and Kochi driven by lower GST rate (from 28% to 18%), drop in ticket prices and new ride additions in the amusement parks. We maintain Buy with target price of 377.
Q1FY19 Result Update:
* Wonderla’s net revenue stood at Rs 103.9 cr in Q1FY19 as compared to Rs 102.3 cr in Q1FY18, improved marginally by 1.5%, due to increase in overall footfalls by 6.3% and higher products sales by 15.1% yoy. Strong revenue growth of 26.2% was witnessed in Hyderabad Park; however revenue de-grew by 3.8% and 8.7% in both Bangalore and Kochi Parks. Also, during the quarter, footfalls improved in Hyderabad and Bangalore Parks with yoy growth of 21.6% and 3.3%, respectively, while de-growth of 2.1% yoy in footfalls was seen in Kochi Park because of Nipah virus scare and heavy rains.
* Robust margin improvement was witnessed in both EBITDA and PAT in Q1FY19 driven by operational efficiency and cost saving drive. Company posted EBITDA of Rs 57.5 cr and PAT of Rs 33 cr, while EBITDA margin stood at 55.3%, improved by 1,267 bps and PAT margin was at 31.7%, expanded by 638 bps, due to decrease in overall expense by 21%.
* Concall Highlights: 1) Wonderla’s resort in Bangalore has achieved 45% occupancy during the quarter and going forward plan is to increase revenue by encouraging more retail and corporate events, etc. 2) Wonderla has acquired land for its fourth amusement park in Chennai and it is expected to get operational by 2021. 3) In next 2-3 years, management expects improvement in both revenue and footfalls across all the three parks, however near term concern would continue in Kochi Park, because of heavy rains in Kerala.
Outlook & Valuation:
Wonderla Holidays is well placed in leisure segment being one of the leading amusement park operator in India. Currently it has three parks operational in Bangalore, Hyderabad and Kochi and one resort in Bangalore. Further by 2020-21, it has plans to open its fourth park in Chennai where the land has already been acquired. Higher discretionary spending by consumers, reduction of ticket price due to fall in GST rates, addition of new rides in parks and more food and beverage offerings would help drive both ticket and non-ticket revenues. Further, better in-ventory management and cost reduction measures would help the company to expand its EBIDTA and PAT margins with CAGR of 16.8% and 22.2%, respectively in FY18-FY20E. We remain positive on the company’s growth prospects and expect CAGR revenue growth of 11% in FY18-FY20E. We maintain a Buy on the stock with a target price of Rs 377.
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