Wonderla Holidays’ (Wonderla) 7.5% YoY revenue dip and 79.2% YoY EBITDA growth in Q4FY18 came in line with estimates. Like-to-like, revenue grew 2% YoY, factoring provision made for disputed taxes. Share of non-ticket revenue rose 10.6% YoY following introduction of F&B offerings and costume sales. EBITDA margin expanded for third consecutive quarter primarily led by cost rationalisation. The company had cut ticket prices 10% post reduction in the GST rate from 28% to 18%. Management expects recovery in footfalls in FY19 led by new rides and rational ticket prices hike (2% price hikes thus far in FY19).
We like Wonderla’s strategy of adding new rides and increasing non-ticketing revenue avenues to spur footfalls. However, the impact of sharp price hikes on footfalls remains a key monitorable. Maintain ‘BUY’. Key highlights: (i) Footfalls at Bengaluru, Kochi and Hyderabad parks declined 15.2%, 17.0% and 1.3% YoY, respectively; (ii) Average revenue per visitor grew 3.8% YoY with share of non-ticketing revenue rising to 28.7% from 25.3% helped by new F&B offerings and mandatory costumes for water rides; and (iii) Management‘s major cost rationalisation programme led to 32.3% YoY fall in other expenses, resulting in 1,347bps YoY expansion in EBITDA margin.
In FY19 thus far, Wonderla has hiked prices by 2%. Has not seen any impact of Nipah virus till now; however, going forward, it needs to be monitored. Targeting non-ticket revenue of 40-50%. Management believes new rides as well as rational hike in ticket prices will spur footfalls in FY19.
Reduction in GST rate, strong brand and reasonable pricing power place Wonderla in a sweet spot. With multiple price changes now behind, pricing communication to customers will be much transparent. We retain 17x FY20E EV/EBTIDA to arrive at TP of Rs 420. We maintain ‘BUY/SP’. At CMP, the stock is trading at 14.3x FY20E EV/EBITDA. Wonderla, India’s largest amusement park chain, is in a sweet spot with the amusement park industry set to swing upwards spurred by favourable macro-economic tailwinds and increased penetration.