Wonderla Holidays is on the brink of a re-rating, believe analysts at Ambit Capital. Park openings in Odisha, Chennai and signing of new parks will be the key factor behind this, they said.
"In an industry riddled with high entry barriers and failures, Wonderla stands out with net cash of Rs 250 crore," the firm said in a recent report. The edge stems from disciplined execution, cost edge given in-house design, manufacturing and installation of rides and superior brand recall, the report added.
The commissioning of new parks in Odisha and Chennai is expected to drive 19 percent revenue growth, 19 percent EBITDA growth, and 18 percent EPS growth Compound Annual Growth Rate (CAGR) over the period from FY23 to FY28.
This growth will be supported by a 9 percent CAGR in average revenue per user (ARPU) and footfall, they added.
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Drawing parallel between India's current position in the leisure and entertainment sector and where China was in 2006, Ambit Capital believes the shift from a subsistence to a spending economy, there is potential for exponential growth in per capita spending, benefiting leisure-focused players like Wonderla. Furthermore, ownership of three mature parks as strategic assets is also an advantage for the company.
"Current valuations, trading at 16x FY24 EV/EBITDA and a 30 percent discount below pre-Covid levels, are seen as inexpensive," believe Ambit Capital's analysts.
Regional Chinese players (Songcheng) trade at premium valuations (22x FY24 EV/EBITIDA) given growth longevity so Wonderla can also re-rate as it evolves into an entertainment destination, the report added.
At 3 pm, the stock was quoting at Rs 808.35 on the NSE, higher by 1.26 percent from previous close.
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