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Pricing momentum drives revenue

Wonderla Holidays (Wonderla) delivered another strong quarter in Q2FY23 which is typically the weakest quarter owing to monsoon with revenue of Rs0.7bn which was 62% higher than pre-Covid (Q2FY20) levels on the back of total footfalls growing 32% over pre-Covid levels along with average ticket revenue per user (ARPU) up by 22% vs. pre-Covid levels. As a result, Q2FY23 EBITDA of Rs0.2bn was up 2.5x over pre-Covid levels. While we have increased our total footfall assumptions by 2% each for FY23/24E, we have raised our ARPU estimates by 10- 15% across parks leading to FY23E EBITDA of Rs1.9bn (82% above FY20 levels where Q4FY20 was a Covid impacted quarter) and FY24E EBITDA of Rs2.2bn (110% above FY20 levels). We maintain our BUY rating with a revised target price of Rs628/share (earlier Rs479) valuing it at 15x Mar’24E EV/EBITDA (unchanged multiple). With net cash/investments of ~Rs2bn as of Sep’22, the company has signed its agreement with the Odisha State Government to build its next amusement park in Bhubaneshwar for Rs1.3bn. Key risks to our rating are fresh park closures owing to Covid and slow recovery in footfalls and pricing

* Strong performance in a seasonally weak quarter: In the first quarter post pandemic where the company’s operations were not impacted by park closures/restrictions, the company’s Q1FY23 revenue was higher by 27% over Q1FY20 (pre-Covid) levels at Rs1.5bn primarily led by strong recovery in footfalls across parks which increased by 24% to 1.12mn during the quarter. In Q2FY23 which is a seasonally weak quarter owing to monsoon, the company clocked revenue of Rs0.7bn (62% higher than Q2FY20 levels) on the back of total footfalls growing 32% over Q2FY20 along with ARPU up by 22% vs. pre-Covid levels.

* We revise estimates for FY23/FY24E led by surge in ARPU: While we have increased our total footfall assumptions by 2% each for FY23/24E, we have raised our ARPU estimates by 10-15% across parks leading to FY23E EBITDA of Rs1.9bn (82% above FY20 levels where Q4FY20 was a Covid impacted quarter) and FY24E EBITDA of Rs2.2bn (110% above FY20 levels).

* Debt free balance sheet and cash flows to spur future growth plans: With a strong H1FY23 performance, the company has a debt free balance sheet along with net cash/liquid investments of ~Rs2.0bn as of Sep’22. The company has recently signed the agreement with the Odisha State Government for the development of an amusement park in Bhubaneshwar for which it has signed a 90-year lease on 50.63acres of land which will entail total capex of Rs1.3bn over 24-30 months which can be funded through internal accruals. Management estimates ticket pricing for Odisha Park to be ~60% of existing parks. Further, the company remains confident of a resolution of the Local Body Tax issue in Chennai for that project to take off

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