Small Cap Stock To Buy: Amusement Park With Growing Footfalls, Solid Results

Sharekhan is betting on the stock of Wonderla Holidays for good returns. The brokerage is looking at an upside of more than 30% on the stock.

Buy the stock of Wonderla for a price target of Rs 285

Current market price	Target price	Gains %
Rs 218	285	30.7

Sharekhan has set a price target of Rs 285 on the stock of Wonderla Holidays as against the current market price of Rs 218.

Strong footfalls for the quarter

According to Sharekhan footfalls reached to 53% of pre-COVID levels in Q3FY2022. "Park plus strategy has helped company to record higher footfalls of more than 1,000 per day during the event. Third wave might have some impact on the Q4 performance as Bengaluru and Kochi parks were shut for two weekends in the month of January 2022. Footfalls were lower at beginning of Q4FY2022 and are expected to improve from mid-Feb with restrictions easing out in most states," the brokerage has said.

According to the management commentary as highlighted by Sharekhan, the average ticket price stood at Rs. 1,200 per visitor in Q3FY2022 (Rs. 847 in Q2FY022), which is much better than Rs. 973 per visitor in Q3FY2020.

"Higher average realisations and improved footfalls will help the EBIDTA margins to improve in the coming years. However, the company's spending on marketing and promotional activities will be on a higher side to attract more customers," the brokerage added in its report.

Expansions to drive growth

Wonder La will focus on improving business fundamentals of existing parks to pre-COVID levels in the near term. However, the company will start the construction of new park in Bhubaneshwar in the backdrop stable macro-economic environment. Further, it will consult with Tamil Nadu government for construction of new park in Chennai.

Valuations and view

The management is confident that footfalls will maintain a good growth momentum due to pent-up demand and various promotional events conducted by the company to attract more footfalls. "This will boost profitability in FY2023/24. The company has strong liquidity position of Rs. 91 crore which will be utilised for investment in development of new parks. The stock is currently trading at 13.4x/10.4x its FY2023E/24E EV/EBIDTA. We like the management's focus on regaining footfalls, stringent cost management and a maintaining lean balance sheet in the uncertain environment. We maintain our Buy recommendation on the stock with an unchanged price target of Rs. 285," the brokerage has said.