Buy Imagicaaworld Entertainment; target of Rs 116: Prabhudas Lilladher

Prabhudas Lilladher's research report on Imagicaaworld Entertainment

Imagicaaworld Entertainment Ltd (IEL) reported strong operational performance with EBITDA margin of 59.3% (PLe 51.9%), while bottom-line was aided by a change in depreciation policy. We increase our EBITDA estimates by 4.4%/2.7% for FY25E/FY26E in the light of strong performance in 1QFY25. However, our PAT estimates have undergone a major revision as new parks acquired via slump sale will be depreciated under the SLM policy. Consolidation of parks at Lonavala & Shirdi not only acts as a growth kicker but is also expected to lend significant synergy benefits arising from F&B vendor consolidation and employee cost rationalization. Launch magic pass, addition of another banquet at a hotel in Khopoli and introduction of retail products at Wet’nJoy parks are possible triggers that can result in earnings upgrade.

Outlook

We expect sales/EBITDA CAGR of 31.8%/43.4% over FY24-FY27E and retain BUY on the stock with an SOTP-based TP of Rs116 (earlier Rs112) valuing the park/hotel business at EV/EBITDA multiple of 23x/21x (no change in target multiple).

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