Buy This Small-Cap Stock For Target Price Of Rs 479, Stocks Surged More Than 50% Returns In 3 Months

ICICI Securities in its recent report on Wonderla Holidays Limited has suggested buy the stocks of the company for a target price of Rs 479 apiece. Considering the brokerage estimated target price, the stock of Varroc Engineering could surge 38% in 12 months. Wonderla Holidays is a small-cap auto components & equipment company having a market capitalization of Rs 1,966.15 crore.

Stock Outlook

19 August, the stock of the company closed at Rs 347.70 after a fall of 3.84%. The current market price of the stock is Rs 151.05 above its 52 week low and Rs 26.3 below the 52-week high, respectively. 

The 52-week low of the stock is Rs 196.65 apiece recorded on September 14, 2021, and the 52-week high is Rs 347 apiece recorded on April 29, 2022. The ROE of the stock is negative at 1.18%. 

Returns on Investments

Over the week, the stocks have fallen 3.28%. In the past 1 month, the stock surged 50.26%. In the past 3 months, the stock surged 64.51%. In the past 1 year, the stock has surged 53.14%. In the past 3 years, the stock gave a positive return of 39.02%. In the past 5 years, the stocks surged roughly 1.92%. 

Blowout quarter

In the first quarter post-pandemic where the company's operations were not impacted by park closures/restrictions, the company's Q1FY23 revenue was higher by 27% over Q1FY20 (pre-Covid) levels at Rs1.5bn primarily led by strong recovery in footfalls across parks which increased by 24% to 1.12mn during the quarter. While the Bengaluru park saw 7% footfall growth over pre-Covid levels, the Hyderabad and Kochi parks both clocked 38-39% footfall growth over pre-Covid levels. Further, with blended average revenue per user (ARPU) coming at Rs1,300 in Q1FY23 vs. Rs1.275 in Q1FY20 and operating expenses rising by 18.5% over Q1FY20, Q1FY23 EBITDA of Rs0.9bn was 33.1% higher than Q1FY20 levels.

Brokerage revise estimates for FY23/FY24E led by surge in footfalls

The brokerage said, "We had earlier modeled for footfalls across parks to recover to 75% of FY20 levels in FY23E and 100% in FY24E and EBITDA of Rs0.8bn in FY23E and Rs1.1bn in FY24E vs. FY20 EBITDA of Rs1.0bn. However, with the stellar bounce back in footfalls, we have increased our total footfall/revenue assumptions by 59/43% for FY23/24E respectively leading to FY23E EBITDA of Rs1.4bn (37% above FY20 levels) and FY24E EBITDA of Rs1.7bn (61% above FY20 levels)."

Debt-free balance sheet and cash flows to spur future growth plans

With a strong Q1FY23 performance, the company has a debt-free balance sheet along with net cash/liquid investments of ~Rs2.0bn as of Jun'22. The company has recently signed the agreement with the Odisha State Government for the development of an amusement park in Bhubaneshwar for which it has signed a 90-year lease on 50.63acres of land which will entail total capex of Rs1.3bn over 24-30 months which can be funded through internal accruals. Management estimates ticket pricing for Odisha Park to be ~60% of existing parks. Further, the company remains confident of a resolution of the Local Body Tax issue in Chennai for that project to take off.

Back with a bang, Buy for a target price of Rs 479

Returns on Investment Wonderla Holidays (Wonderla) delivered a blowout quarter in Q1FY23 with revenue of Rs1.5bn which was 27% higher than pre-Covid (Q1FY20) levels on the back of total footfalls growing 24% over pre-Covid levels. As a result, Q1FY23 EBITDA of Rs0.9bn was up 33% over pre-Covid levels and we have increased our total footfall/revenue assumptions by 59/43% for FY23/24E respectively leading to FY23E EBITDA of Rs1.4bn (37% above FY20 levels) and FY24E EBITDA of Rs1.7bn (61% above FY20 levels).

"We maintain our BUY rating with a revised target price of Rs479/share (earlier Rs321) valuing it at 15x Mar'24E EV/EBITDA (earlier Dec'23). With net cash/investments of ~Rs2bn as of Jun'22, the company has signed its agreement with the Odisha State Government to build its next amusement park in Bhubaneshwar for Rs1.3bn. Key risks to our rating are fresh park closures owing to Covid and slow recovery in footfalls and pricing," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of ICICI Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.