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Better days lie ahead

Wonderla Holidays (Wonderla) saw Q3FY22 revenue bouncing back to 69% of Q3FY20 (pre-Covid) levels with its Bengaluru and Hyderabad parks remaining fully operational for the quarter and Kochi park operating for 80 days. While Omicron has impacted Jan’22 footfalls and revenue, things are normalizing from Feb’22. Also, heading into Q1FY23, which is seasonally the strongest quarter, revenue trajectory is expected to improve. We model for footfalls across parks to recover to 75% of FY20 levels in FY23E and 100% in FY24E and EBITDA of Rs0.8bn in FY23E and Rs1.1bn in FY24E vs. FY20 EBITDA of Rs1.0bn. We maintain our BUY rating with a revised target price of Rs321/share (earlier Rs294) as we roll forward our valuation to Dec’23E (earlier Sep’23E) valuing the company at 16x Dec’23E EV/EBITDA. Key risks to our rating are extended park closures in FY23E and slow recovery in footfalls and pricing.

Recovery in Q3FY22 footfalls an encouraging sign: The company’s amusement parks were closed for operations between Apr-Jul’21 owing to the second Covid wave in India. However, with the second Covid wave receding, as per the unlock guidelines by respective Indian State Governments, the Hyderabad Park re-opened on 5th Aug’21, followed by the Bengaluru Park on 12th Aug’21 and Kochi park on 1st Sep’21. While the Hyderabad and Bengaluru parks remained operational on all days in Q3FY22, the Kochi park was operational only between Thursday-Sunday or 80 days during the quarter. An encouraging sign was footfalls across parks reaching 0.38mn in Q3FY22 or 52% of Q3FY20 (pre-Covid) levels in spite of many disruptions such as extreme weather conditions in Oct-Nov’21 in Bengaluru and the Omicron wave impact in Dec’21. Q3FY22 revenue of Rs483mn was at 69% of Q3FY20 levels owing to higher ticket pricing of Rs1,189 (Rs886 ticket and Rs303 non-ticket) with EBITDA margins of 29.5%. As per company, while Jan’22 operations have been affected by Omicron, things are gradually normalizing from Feb’22. Heading into Q1FY23, footfalls and revenue trajectory may improve considering that the AprilJune period is seasonally the strongest quarter for the company.

We build in recovery to pre-Covid EBITDA levels by FY24E: While the continued momentum in footfalls is encouraging, we model for footfalls across parks to recover to 75% of FY20 levels in FY23E and 100% in FY24E and EBITDA of Rs0.8bn in FY23E and Rs1.1bn in FY24E vs. FY20 EBITDA of Rs1.0bn.

Liquidity position remains comfortable with a debt free balance sheet: While it is difficult to estimate the exact time when the company’s amusement parks return to pre-Covid footfalls and revenues, with the company having a debt free balance sheet and cash and liquid investments of Rs0.8bn as of Sep’21, we believe that the company is well cushioned to tide over a prolonged recovery period in FY22-23E.

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