Wonderla Holidays (WHL) is the largest amusement park chain in India with over 17 years of successful operations. WHL has been running amusement park in southern India through 3 operational parks in Kochi, Bangalore and Hyderabad.
The company follows low capex model with its parks located near large cities with less than 7 years of payback period as against capex intensive holiday destination model. In order to tap huge opportunity in the sector, WHL is expanding its presence to Chennai where it has finalized land and is further targeting new geographies particularly in western India.
WHL intends to setup new park every 3 years which would be funded through its strong balance sheet and robust cash flows with negligible debt. The contribution from high margin non-ticket revenue has been increasing over the past 5-6 years from 14% in FY12 to 25% in FY17 and is expected to increase further to 28% in FY19E.
We expect company’s revenue and PAT to grow at a CAGR of 18% and 46% respectively in FY17-19E (due to lower base of FY17). We recommend ‘Buy’ on the stock with DCF based target price of Rs 465. Indian amusement park sector valued at Rs 2,930 crore in 2016 grew at 10.25%. The sector is very small as compared to Rs 1.675 lakh crore ($25 billion) global amusement park sector. It is at a nascent stage in India and is on the verge of transition.
The park to population ratio is remarkably lower in India as compared to the USA market which has 400 theme parks for a population of 319 million. With rising income levels, increasing domestic tourism and favourable demographics, the sector is estimated to grow at a CAGR of 19% over the next 5 years to Rs 6,980 crore by end of 2021.