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Buy Wonderla Holidays Ltd For Target Rs.250

Expect strong recovery post resumption of normalcy

Wonderla Holidays reported a strong recovery in earnings post reopening of parks at Bengaluru, Kochi and Hyderabad in Q4FY21. Revenue for the quarter improved sharply from | 4.9 crore to | 33.3 crore QoQ though revenue remained down 21.4% YoY as parks were functional only during Thursday-Sunday till February 2021 while they remained open all seven days in March. The company achieved total footfalls of 3.11 lakh against 4.05 lakh last year.

Thus, Wonderla managed to clock EBITDA of | 2.5 crore vs. EBITDA loss of | 10.1 crore in Q3FY21. However, it was down 49.3% YoY. Net loss of | 4.9 crore is mainly attributable to depreciation charge while the company managed to report cash profit of | 2.5 crore. The ongoing second Covid wave in India has again led to a closure of parks from April 2021. With debt free status and no capex in FY22E, we believe Wonderla should be able to tide over the Covid induced challenges in FY22E.

While H1FY22E again looks tough, with easing of restrictions post stabilisation of infections (likely from H2FY22E) led by increased vaccinations, going ahead, in the country, we expect a rebound in demand from H2FY22E. This is expected to lead to healthy margins and profitability aided by tighter cost controls. While FY22E would be a mixed bag though better from FY21, we expect the company to attain healthy revenue above pre-Covid levels in FY23E. We also expect Wonderla to attain highest EBITDA margins leading the company to report PAT over | 75 crore.

Full recovery expected by FY23E

Wonderla’s business was severely hit in FY21 with the company clocking revenue of only sub | 5 crore in 9MFY21. While Q4FY21 witnessed a sharp rebound in demand, the ongoing second wave during April-June (peak season for the company) has again impacted demand with parks remaining shut from April onwards. Now, with stabilisation of infections and increased vaccinations, we expect the company to clock footfalls of 11.3 lakh in FY22E and 24.9 lakh in FY23E against 3.1 lakh in FY21.

New Chennai project kept on hold

According to the management, the construction work on the Chennai amusement park is still at an initial stage and has been put on hold till the end of FY22 until clarity emerges on local body tax issues with the state government. The company continues to explore options for new parks in Odisha and Gujarat.

Valuation & Outlook

Wonderla Holidays is comfortably placed on the balance sheet front, led by debt-free status and strong liquidity that should help it tide over challenges imposed by the second wave of pandemic. Further, the encouraging Q4FY21 performance and ongoing vaccination drives raise our hopes on a strong demand recovery as and when normalcy resumes. With improved demand visibility, we now upgrade our rating from REDUCE to BUY with a revised target price of | 250/share (i.e. 19x FY23E P/E, earlier TP: | 110).

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