Shares of Wonderla Holidays registered their best performance in the current year with a rally of 77.14 percent so far, moving from ₹206.05 apiece to ₹365.
The stock surged 50.22 percent in August, the greatest monthly gain to date. The stock's previous best monthly gain was in August 2014, when it jumped 47.17 percent.
The stock's tremendous rise was attributed to the company's impressive performance in the June g quarter. At the prevailing price, the stock is trading 85.75 percent higher than its 52-week low of ₹196.6.
However, based on recent estimates by the analysts at Sharekhan, the stock still has the ability to grow further. The brokerage stated that the stock was its preferred pick in the small-cap discretionary space with a strong brand presence in the amusement park category coupled with a lean balance sheet despite an asset-heavy model.
“The company has sustained its momentum in Q3 FY23 with strong footfalls during holidays and weekends (largely driven by walk-ins). The company reported footfalls of 16 lakhs in H1FY23.”
“We expect footfalls to touch 27 lakhs in FY2023. Footfalls in H2FY23 are expected to grow by more than 20% compared to H2FY2020,” said the brokerage.
In terms of revenue, the brokerage expects ARPU to reach ₹390 in FY2023. With defined strategies to drive footfalls and a 7-8 percent increase in ARPUs, revenue is expected to post a CAGR of 15 percent over FY2023–FY2025, it says.
Further, the addition of two new parks in Chennai/Odisha will lead to incremental footfalls and will add to revenue in the medium to long run, it noted.
The company has budgeted Rs. 330 crore for the Chennai park and Rs. 125 crore for the Odisha park, of which it has already spent Rs. 127-128 crore. The remaining capex of ₹320–325 crore will be done through internal accruals over the next two years, as the company has cash of close to ₹200 crore and is likely to generate ₹100 crore of cash incrementally every year without putting stress on the balance sheet, according to the brokerage.
The company is also focusing on increasing the share of footfalls from walk-ins, the brokerage added, which will help it achieve higher ARPUs.
Wonderla has strong penetration in the southern market. The company is targeting western and eastern markets to develop new parks under the asset-light model.
Sharekhan has maintained its "BUY" call on the stock with an unchanged target price of ₹425 per share, which hints towards an upside potential of 16.43 percent from the stock's previous closing price.
However, the brokerage also stated some of the key risks for the stock, including a slowdown in footfalls in some of the existing parks due to unavoidable events or erratic weather conditions or a delay in the commencement of new parks, which would lead to a re-rating of its estimates.
On the financial side, the pandemic caused the company to experience a rough time in 2020, and as a result, it registered net losses of Rs. 14.3 crore and Rs. 15.8 crore in the first and second quarters of that year, respectively. Through the second quarter of 2021, losses persisted. But in the third quarter of 2021, it finally came to an end with a profit of Rs. 4.5 crore.
In the recent September quarter, the company posted a net profit of ₹10.5 crore, compared to a net loss of ₹9.3 crore in the year-ago quarter. The company posted a net profit of ₹64.4 crore in the preceding quarter.
The company's revenue from operations in Q2FY23 rose 280 percent to ₹69.7 crore from ₹18.3 crore in the corresponding quarter of the previous fiscal. Sequentially, the revenue was down by 19.79 percent. During the quarter, the EPS also improved to ₹15.6 from ₹12 in the preceding quarter.
Two analysts polled by MintGenie have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.