Analysts at Ambit Capital are optimistic about the future of Wonderla Holidays, predicting that the company is on the verge of a significant upward revaluation. According to their assessment, the opening of new amusement parks in Odisha and Chennai, as well as the signing of agreements for additional parks, will be the primary drivers behind this potential growth.
In a recent report, Ambit Capital highlighted Wonderla’s remarkable position in an industry known for its high entry barriers and numerous failures. The firm pointed out that Wonderla possesses a substantial net cash reserve of Rs 250 crore. They attribute this advantage to the company’s disciplined approach to execution, cost-efficiency resulting from in-house design, manufacturing, and installation of rides, as well as a strong brand recall.
The expected commissioning of new parks in Odisha and Chennai is anticipated to fuel impressive growth figures. Ambit Capital forecasts a Compound Annual Growth Rate (CAGR) of 19 percent in revenue, 19 percent in EBITDA, and 18 percent in EPS from FY23 to FY28. This growth will be further supported by a 9 percent CAGR in average revenue per user (ARPU) and footfall, according to their analysis.
Drawing a comparison between India’s current position in the leisure and entertainment sector and where China stood in 2006, Ambit Capital sees tremendous potential for exponential growth in per capita spending as the country shifts from a subsistence to a spending-oriented economy. This shift is expected to benefit leisure-focused companies like Wonderla. Additionally, the ownership of three mature parks is seen as a strategic advantage for the company.
Ambit Capital’s analysts believe that the current valuations of Wonderla are attractive. The stock is currently trading at 16 times FY24 EV/EBITDA, with a 30 percent discount compared to pre-Covid levels. They also note that regional Chinese players, such as Songcheng, trade at premium valuations (22x FY24 EV/EBITDA) due to their growth potential, suggesting that Wonderla has room for revaluation as it evolves into a prominent entertainment destination.
As of 3 pm, Wonderla’s stock was trading at Rs 808.35 on the NSE, marking a 1.26 percent increase from the previous close.
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