Wonderla Holidays’ (Wonderla) Q4FY16 revenue came in line with our estimate, while PAT surpassed it riding lower-than-estimated tax rate. Revenue growth was 22.1% YoY with flattish footfalls. EBITDA rose mere 7.9% YoY impacted by higher staff and labour costs (top level hiring and labour cost at new park) and service tax provision. PAT jumped 14.9% YoY to INR76mn as tax rate dipped 376bps QoQ. Wonderla took lower price hike of ~4% in existing parks in FY17 (10% historically) and will compensate it with higher number of peak days. Maintain ‘BUY’.
Mixed footfall trend; price hike impacts college/school crowd
Key highlights: (i) while Bengaluru footfalls rose 6.7% YoY, Kochi posted 8.1% YoY dip; (ii) footfalls were impacted by slowdown in group crowd (~32% of total) which was dented by higher price hikes in FY16 (~23% to counter service tax hike); (iii) EBITDA margin slipped 324bps YoY due to service tax provision of INR47.9mn and higher employee costs; and (iv) resort revenue rose 21.4% YoY with 45% occupancy.
Q4FY16 conference call: Key takeaways
Q1FY17 has seen flattish growth till now. The company estimates 4-5% growth in footfalls in FY17. School and college crowd is also estimated to return in FY17 as the pricing hike is lower. Wonderla has commenced RFID based cashless transactions at Hyderabad Park on trial basis—should be convenient to consumers (expect 50% to shift to this). The company has started operating 1 additional restaurant each at legacy parks, which is estimated to be margin accretive. F&B posted ~45-48% gross margin. Management maintained FY17 footfall guidance of 0.7mn at Hyderabad Park (expects to touch 1mn in 3 years).
Outlook and valuations: Positive; maintain ‘BUY’
Excellent management pedigree, strong brand, new Hyderabad park (commenced on time and received good response) and reasonable pricing place Wonderla in a sweet spot. Ergo, we estimate the company to clock EBITDA CAGR of ~33% over FY16-18. At CMP, the stock is trading at 18.3x and 14.6x FY17E and FY18E EV/EBITDA, respectively. We maintain ‘BUY/SO’ with target price of INR429 (16x FY18E EBITDA).
