Sound management, robust brand franchise, reasonable pricing and attractive rides place Wonderla in a sweet spot to gain from urban recovery. At CMP, the stock is trading at 15.4x/11.8x FY16E/17E EV/Ebitda.
Capex of Rs 25 crore will be incurred at the Bengaluru park in FY16 towards adding two newrides. Water-based ride started in Q1FY16 (capex of Rs 3 crore), while big roller coaster (capex of Rs 20 crore) is expected to start in Q4FY16.
Wonderla bought the roller coaster in a distress sale from another park (saved ~Rs 20 crore). Over the next 3-4 years, Wonderla will be incurring capex of ~Rs 20-25 crore towards its Kochi park.
Our meeting with the top management indicates that the company has maintained its guidance of 3-4% y-o-y footfall growth for FY16, and in its endeavour to raise levels of professionalism in the organisation, CEO Dipinderjit Singh Sachdeva (ex-HUL and 3M) has been appointed.
In Q2FY16, footfall growth saw some improvement and is expected to grow ~5% y-o-y, despite the sharp 25% price hike in Q1FY16. Impact of the hike will be clear in Q3FY16 as it will have higher share of group crowds, which is price sensitive. Wonderla is insulated from rural slowdown (visitors from rural areas come once in 3-5 years) and will be beneficiary of revival in urban growth. The Hyderabad park will start in April 2016. The company has also shortlisted 2 sites in Chennai.