Buy Awfis Space Solutions Ltd For the Target Rs. 860 by Choice Broking Ltd
AWFIS is on track to exceed its initial FY25 revenue growth guidance of 30%
* Q3FY25 consolidated revenues at INR 3,177 Mn, up 41% YoY and 5% QoQ (vs CEBPL est. INR 2,488 Mn).
* EBITDA for Q3FY25 was reported at INR 1,073 Mn, up 2% YoY and 7% QoQ (vs CEBPL est. INR 1,039 Mn).
* Net profit for Q3FY25 stood at INR 152 Mn, down 51% YoY and 61% QoQ (vs CEBPL est. INR 199 Mn).
* Number of seats added was 11,554 in Q3FY25 (vs 15,148 in Q2FY25), taking the total operational seat count to 1,20,000. The blended utilization level is 73%
Scaling up of its seat capacity through the asset-light -‘Managed Aggregation Model’(MA):
The share of seats under the Managed Aggregation (MA) model has grown from 46% in FY21 to 67% currently. This model offers a superior return on investment due to its lower capital requirements and reduced risk profile compared to the Straight Lease (SL) model. Its agility in adapting to market conditions and minimal upfront investment provide AWFIS with a strategic advantage, enhancing scalability while lowering risk
The Office Rental and AWFIS Transform segments (construction & fit-out vertical) are set to propel at 26% CAGR in revenue growth over FY24-FY27.
* In the Office Rental segment, the seating capacity is expected to reach to ~1,60,000 seats vs 1,35,000 seats by March 25 and capacity utilization will inch up from 73% to ~83% over time due to increasing contribution from more than 1 year old seats. This will lead to a 25% CAGR in revenue over FY24-FY27E.
* In the AWFIS Transform segment, increase in business from external clients will be margin accretive as it commands higher margins in the range of 18-20% (gross margins) as compared to 15% margin being derived from doing fit-outs of its own landlord’s work spaces. This will lead to a 30% CAGR in revenue over FY24-FY27E
View and Valuation:
Management expects the co-working sector to grow at a 20-25% CAGR over the coming years, with AWFIS, the market leader in terms of seating capacity wellpositioned to capitalize on this growth. The company plans to expand primarily through an asset-light MA model, enabling rapid scaling with lower capital investment. Higher occupancy levels are expected to drive better margins, while strong brand recall and a cost advantage over peers will support market share gains. In addition, robust demand in the office fitout segment from increasing share of third party orders will lead to revenue growth and margin improvement. We have introduced our FY27 estimates and retain our multiple of 23x on FY27E EPS, revising our TP to INR 860
Point to note: Post the IPO in May 2024, one of the promoters, Peak XV Partners, has reduced its stake significantly from 11.04 to 3.3%. However, Amit Ramani, the current promoter and managing director’s stake is almost unchanged at 17.1%.
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SEBI Registration no.: INZ 000160131
