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CD Equisearch Pvt Ltd Feb 26, 2015

Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance

Wonderla Holidays Ltd. (WHL)

No. of shares (crore) 5.65

Mkt cap (Rs crs) 1584

Current price (25/02/15) 280

Price target (Rs) 342

52 week H/L (Rs.) 355/156

Book Value (Rs.) 64

P/BV (FY15e/16e) 4.4/3.8

P/E (FY15e /16e) 29.1/24.6

BSE Code 538268

NSE Code WONDERLA

Bloomberg WONH IN

Daily volume (avg. weekly) 121858

Shareholding pattern % Promoters 70.98

MFs / Banks / FIs 2.10

Foreign 8.61

Govt. Holding 0.00

Non-Promoter Corp. 4.67

Total Public 13.64

Total 100.00

As on Dec 31, 2014

Recommendation

BUY

Analyst

VIPUL SANGHANI

Phone: + 91 (33) 4488 0055

E- mail: [email protected]

Figures in Rs crs FY12 FY13 FY14 FY15e FY16e

Income from operations 113.13 137.85 153.63 185.32 222.39

Other income 1.39 1.52 2.38 9.48 6.64

EBITDA (other income included) 57.14 64.34 73.03 98.11 113.05

Adjusted net profit 30.04 33.58 39.91 54.49 64.41

EPS- Diluted 5.32 5.94 7.06 9.64 11.40

EPS growth (%) 1.0 11.7 18.9 36.6 18.2

Company Brief Wonderla Holidays Ltd. (WHL) is one of the largest operators of

amusement parks in India. It owns and operates two amusement parks

under the brand name "Wonderla", situated at Kochi and Bengaluru. It

has also developed a Wonderla resort in Bengaluru, a three star leisure

resort next to its amusement park which has been operational since

March 2012.

Key Highlights � The Indian Amusement Park Industry is still at a nascent stage of

growth and is highly under penetrated. The country’s amusement

parks industry, with 150 players, generated revenues of over Rs1800

cr in FY13. As per IAAPI estimates this will more than double to Rs

4000 cr by 2020. The main growth drivers would be rising

discretionary spend on account of increasing per capita income,

favorable demographic structure, lack of entertainment options and

government thrust on tourism sector.

� The company's competitive strength lies in its in-house

manufacturing facility at Wonderla Kochi to manufacture/construct

amusement rides and attractions, apart from amusement rides

procured from manufacturers within and outside India. As of Jan 31

2014, WHL constructed/manufactured 42 rides/ attractions. This has

helped the company to reduce capex incurred on the rides; as per

the management, the cost of a ride manufactured in-house is one-

third of the cost of procuring the ride externally.

� WHL’s net sales has grown at an impressive CAGR of 20% over the

last 5 years, while its net profit has grown at more than 29% CAGR

over the same period. We expect company’s net sales to grow by

20.6% in FY15e and by 20% in FY16e on account of increasing per

capita income and rising discretionary spending.

� The stock is currently trading at 29.1x FY15e of Rs 9.64 and 24.6x

FY16e of Rs 11.40. However, looking at the earnings growth, strong

balance sheet and the expansion plan, we assign a buy on the stock

with a target price of Rs 342, based on 30x FY16e, over a period of 9-

12 months.

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CD Equisearch Pvt Ltd


Company Profile Wonderla Holidays Ltd. (WHL) is one of the largest operators of amusement parks in India. It owns and operates

two parks under the brand name "Wonderla", situated at Kochi and Bengaluru. The company's amusement parks

offer a wide range of water and land based attractions catering to all age groups. The rides are a mix of imported,

domestically procured and in-house manufactured. It has also developed a Wonderla resort in Bengaluru, three

star leisure resort next to its amusement park which has been operational since March 2012. In FY14, it had an

annual cumulative footfall 22.9 lakhs. The company had raised Rs 181.25 cr via IPO in CY14 to set up its third park

in Hyderabad.

Wonderla’s amusement park revenues are seasonal with maximum footfalls on weekends and during school

vacations. The April to June (summer vacations) and October to December (holiday season) quarters are typically

the peak quarters. Revenue streams for the amusement parks are ticket sales, sale of products (mainly

merchandise and packaged food) and revenue share from restaurants located inside the park. Ticket sales

accounted for 87% of amusement park revenues in FY13. The company sells all packaged food at MRP. It controls

the menu, quality and pricing at the restaurants present in the premises of the park, and also has a team for overall

supervision of operations.

WHL's promoter Mr. Kochouseph Chittilappilly in the year 1996 had incorporated V-Guard Industries Ltd. which

is a group company of WHL and is listed on BSE and NSE since 2008. Company's promoters launched first

amusement park in Kochi in 2000, by the name 'Veegaland' and second amusement park in Bengaluru in 2005, by

the name 'Wonderla'. Pursuant to a scheme of amalgamation the erstwhile 'Veega Holidays and Parks Private Ltd'

which owned and operated 'Veegaland', merged with the company with effect from 1st April 2008 and

consequently both amusement parks are being operated under the name 'Wonderla'.

The company's business operations can be broadly classified as follows:

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Source: Company, CD Research

Wonderla Kochi The Kochi Park was started way back in the year

2000. It has 22 water based attractions and 33 land

based attractions, which has continuously

attracted footfalls. Kochi Park has achieved a

stable footfall growth of 4% CAGR over the last 5

years from FY 2009-14. The number of footfalls

has increased from 9 lakhs in FY09 to 11 lakhs in

FY14. Of the total visitors, Kochi Park has 56% of

walk in customers, while the balance is

institutional. Of the total available freehold land

of 93 acres of land in Kochi, only 29 acres are

developed. The balance is available for future

expansion of new

rides. During FY14, Wonderla Kochi added three

attractions. "Rokin Tug" a land ride which can

accommodate up to 24 riders, "Fire Brigade" a

revolutionary family ride combines the best of

classic circular car rides with a high tech,

interactive water gun race game which can

accommodate 12 riders and another kids ride

called "Magic Plane" features six colorful, hang

glider themed vehicles for a total of 12 per cycle.

Wonderla Kochi bagged "Best Tourism

Destination award" for the FY 2012-13. The

festivals like Ramzan, Onam and Christmas were

celebrated inside the park. Special events like

shingari melam, stage shows, mobile fun games,

fireworks etc. were organized for the guests. The

park has been recognized as a tourism destination

by the Kerala government Trip Adviser has rated

the park ranked as 13th in Asia.



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Wonderla Bengaluru The Bengaluru Park was started in 2005. It has 20

water based attractions and 35 land based

attractions, situated on 81.75 acres of freehold land.

Bengaluru Park, being a comparatively new park has

grown at a CAGR of more than 13% over the last 5

years from FY 2009-14. The number of footfalls has

increased from 6.3 lakhs in FY 09 to 11.9 lakhs in

FY14. Of the total visitors, Bengaluru Park has 61%

of walk in customers, while rests are institutional

and group booking visitors. During FY14, Wonderla

Bengaluru added two attractions. "XDMAS", a land

ride having a capacity to accommodate 176 visitors,

with high definition 4D video, 7.1 surround sounds,

simulated seats and other environmental effects,

takes people to a virtual world. Another land ride

named "Mini Coco Cups" is a kiddie's ride which

resembles a set of cup and saucer. This ride

accommodates 16 kids and covers an area of 8 meter

diameter. During FY14, Wonderla Bengaluru

announced its grand celebration titled "Facebook

Friday" to celebrate one lakh members on its official

facebook fan page. Dasera, Diwali and Christmas

were celebrated inside the park. Trip Adviser has

rated the park ranked as 8th in Asia.


Details of Wonderla's existing parks

Wonderla Kochi Wonderla Bengaluru

Year of commissioning 2000 2005

Area (acres) 93.17 81.75

Distance from centre of city (kms) 15 28

Capex incurred (Rs mn) 650 900

Attractions

Land based rides 33 35

Water based rides 22 20

No of employees 274 309

No of restaurants 7 7

Yearly footfalls (FY14) (in lakhs) 11 11.9

Yearly revenues (FY 14) (in cr) 62.64 85.71


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Wonderla Resort WHL has developed a unique resort at its

Bengaluru Park comprising of 84 luxury rooms,

with amenities including banquet halls, a board

room, conference rooms, multi-cuisine

restaurant, a solar heated swimming pool,

recreation area, kids' activity centre and a well

equipped gym. The rooms at Wonderla Resort

have other amenities such as, 24 hours in-room

dining facility, LCD television, tea/coffee maker

and Wi-Fi connectivity. The resort has four

banquet/ conference halls totaling 8,900 sq. ft.,

with a capacity to accommodate up to 800

guests and also a well equipped board room,

making it suitable to host wedding receptions,

parties and other corporate events and

meetings. The company has recorded an

average occupancy rate of 30% at Wonderla

Resort in fiscal year 2014.

Data of Bengaluru Park



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Wonderla Hyderabad WHL has raised Rs 181.25 cr in CY14 through an IPO to develop the Hyderabad Park, which will drive future

growth. Its third amusement park is in Ranga Reddy district of Telangana. WHL has acquired 49 acres of land

for the proposed park and is in final stages of approval. The park is approximately 27 kms from central

Hyderabad , 33 kms from Secunderabad railway station and 12 kms from Hyderabad airport The company will

start developing the park from fourth quarter of FY15 and is expected to be operational from last quarter of

FY16 or beginning of FY17.The company intends to develop 27 acres with 24 dry rides and 18 wet rides, of

which 10 land rides will be imported, 14 land rides will be sourced indigenously and 18 water rides will be

sourced indigenously either through in-house manufacturing or from local manufacturers. The company is

estimating a footfall of 700000 in the first year with operating margin of roughly 30%. However, as per

management at a PAT level in the first year Hyderabad will show a loss because of high depreciation cost and

the company expects that it will turn PAT positive from year three onwards.

Detailed cost of Hyderabad Park

Sl

No Particulars

Cost

(Rs cr)

Amount deployed

as on March 5,2014

(Rs cr)

Balance to be

funded through

debt and net

proceeds (Rs cr)

1 Land, land development and civil construction 99.38 25.48 73.91

2 Amusement rides 106.67 9.7 96.97

3 Machinery and equipments 26.14 0.09 26.05

4 Furnishing and vehicles 11.4 0.15 11.25

5 Consultants fees 2.36 0.4 1.95

6 pre-operative expenses 6.25 1.93 4.32

7 Contingencies 3.78 - 3.78

Grand Total 255.98 37.75 218.23 Source: Company, CD Research

Particulars

Amt

(Rs cr)

Gross Proceeds 181.25

Less: Issue Related Exp 10.97

Net Proceeds 170.28 Source: Company, CD Research

Revenue Mix over the Years

IPO Proceeds

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Investment Rationale India's Amusement Park Industry Set to

Witness Multiple Benefits Amusement Park is a generic term for a collection of

rides and other entertainment attractions, assembled

for the purpose of entertaining a large group of

people. An amusement park stands out from a simple

city park as it is more elaborate and provides

attractions meant to cater to adults, teenagers and

kids. Amusement Parks evolved from European fairs

and pleasure gardens, which were created for

recreation purpose. In India amusement park

industry has witnessed a gradual and successful

journey. From just one Appu Ghar in 1984 to over 150

amusement parks in 2013 spread across India. The

country’s amusement parks industry, with 150

players, generated revenues of over Rs1800 cr in

FY13. As per IAAPI estimates this will more than

double to Rs 4000 cr by 2020.In India, within-city

entertainment options are mostly limited to malls and

movie theatres. Hence, there is a lack of full-day

entertainment avenues. Amusement parks are

equipped to plug this gap. Further, amusement parks

keep crowds engaged for a full day at a cost of Rs

800-1,000 per person (including entry ticket and food

and beverages) compared with Rs 200-250 (in tier I

cities) paid for a two-three-hour movie and, hence,

are cost effective too.

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Industry Segmentation

Classification Large Parks Medium Parks Small Parks

Capex > Rs 700 million Rs 300-700 million < Rs 300 million

Area covered > 40 acres 10-40 acres < 10 acres

Average ticket price > Rs 400 Rs 250-400 approx Rs 250

No of visitors / Year > 0.5 million 0.3-0.5 million < 0.3 million

Location Metros and outskirts Outskirts of Metros, Tier

I cities

Tier II cities, small

towns, outskirts of

Metros and Tier I

cities

Examples Essel world (Mumbai), Nicco

Park (Kolkata), Wonderla

(Kochi & Bengaluru),

Kishikinta (Chennai)

GRS Fantasy Park

(Mysore), Ocean park

(Hyderabad)

Fun N food

Kingdom

(Dehradun)

No of parks 16-18 40-45 85-95 Note: Capex does not include cost of land


Source: CRISIL, Economic Times, CD Research

Rising discretionary spend and favorable

demographic structure

India’s discretionary expenditure is increasing at a

rapid pace and is expected to rise further in

coming years on account of higher per capita

income and large young population. More than

65% of India’s population is below the age of 35

years, which augurs well for amusement park

industry. India is one of the youngest countries in

the world with the median age of 26.5 years,

compared to 37.1 years in US, 45.4 years in Japan

and 35.9 years in China. According to CARE

Report, among all the age groups, children below

15 years of age have greatest attraction for

amusement parks- though the overall footfall of

adults is higher; kids drive their families to

amusement parks. In India, around 28.50% of the

population lies in the age group of 0-15 years,

63.40% in 15-59 years and 8.10% in 60 years and

above, respectively. This will lead to higher

spending on leisure and entertainment activities

such as amusement parks, vacations, visits to

multiplexes, restaurants etc.

Source: PWC, Ficci Wellness Report, CD Research

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India's per capita income at current prices has grown

at a CAGR of 16% over FY 2008-14. This increase in

per capita income has built a thriving middle-class

society with rising disposable incomes. This has had a

significant investment multiplier effect on the

economy leading to increasing consumerism and

wealth creation thus positively impacting savings.

With sizeable population in this age bracket, interest

in amusement park is expected to rise. Visiting

amusement parks is a part of discretionary spending

and is perceived to be a leisure activity

The share of discretionary spending in overall

spending has increased from 30% in FY 2001-02 to 40%

in 2009-10 and is expected to increase to 50% by 2019-

20. Thus, rising discretionary expenditure along with

strong demographic dividend pans out good for the

company, which is a niche player in amusement park

industry. The rise in per capita income of the growing

middle class is also contributing to urbanization of the

country. By 2020, the urban population of India is

expected to increase to 35 % of the total population.

Due to this, the demand for entertainment options will

remain strong and instead of having to travel long

distances or even overseas to enjoy amusement rides,

people today chose to spend their earnings nearer

home.

Consolidated Footfall Break up of Visitors

Underpenetrated market and lack of entertainment options

WHL has been present in this business for the past 13 years. In India, within city entertainment options are

mostly limited to malls and movie theatres. There is considerable lack of full day entertainment avenues.

WHL is well equipped and positioned to plug this play and further penetrate the amusement park industry

which is hugely under penetrated in India as compared to other countries of the world. Over the last 5 years,

the Indian leisure industry is estimated to have increased its overall revenue by 20-25%. Malls are primarily

entertainment destinations in Indian cities. Parks in India are well positioned to attract demand from

customer segment. As per CARE Report, the amusement parks industry in India is estimated to be worth Rs

26 billion. As the Indian economy grows and industry models in America and Europe is replicated, Parks will

be able to market themselves as weekend getaways. Parks in India are still in the early stages of development.

Parks in Europe and America generate significant revenue from hotels, as trips to parks tend to be considered

as weekend getaways or holiday destinations. In India, the concept of a park vacation is still not popular.

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Emphasis on tourism sector to boost leisure industry

Travel and tourism contributed INR 2,178.1 Billion to the country’s GDP in 2013. This is expected to rise by

7.5% to INR 2,341.45 Billion in 2014. The number of domestic tourist visits in India during 2012 was 1036.3

million as compared to 864.53 million in 2011, recording a growth rate of 19.9%. Tourism sector is the third

largest foreign exchange earner after gems, jewellery and readymade garments. In 2013, foreign exchange

earnings from tourism were USD 18.13 billion as compared to USD 17.74 Billion in 2012, registering a growth

of 2.2%. It is a big employment generator – every USD 1 Million invested in tourism creates 78 jobs. A

growing recognition of tourism's contribution to employment and economic growth. The availability of visa

on arrival facility significantly influences tourists travel plans to any country. During 2013 a total number of

Comparison of Parks size globally

20294 Visas on Arrival were issued, which amounts to

growth of 26%. The launch of several branding and

marketing initiatives by the Government of India such as

Incredible India! and Athiti Devo Bhava provides a focused

impetus to growth. All these factors augur well for the

company, which is a niche player in amusement park

industry. Local residents form majority of footfall (84%)

followed by domestic tourist (15%) and foreign tourist

consist of only 1%. With rising economic activity, domestic

tourism is expected to increase attracting more footfalls in

the major cities of India. CARE Research expects the

domestic tourism industry to grow at lower double digits in

terms of tourist arrivals. Source: E &Y Report, MOSL, CD Research

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Competitive Landscape of Major Parks in India

Rides Pricing

Parks Location

Size

in

acres

Dry Wet Pricing strategy Entry rate for adults

(Rs per person)

Avg

annual

footfall

(mn)

Essel World & water

kingdom Mumbai 64 Y Y

Separate entry fees

for amusement

park and water

park

Rs 560-690 (for either

amusement park or

water park)

1.8

Nicco Park Kolkata 40 Y Y

Separate entry fees

for amusement

park and water

park

Dry park package- Rs

340 Water charge

package-290

1.7

Wonder La Kochi 93 Y Y Single entry fees Rs 460-600 1.2

Wonder La Bengaluru 83 Y Y Single entry fees Rs 590-790 1.1

Ocean Park Hyderabad 20 Y* Y

Separate entry fees

for water park and

snow park

Rs 300 NA

Ramoji Film City** Hyderabad 1666 - - Single entry fees Rs 600 1.5

Adventure Island &

Metro Walk Rohini 62 Y Y Single entry fees Rs 500 NA

Entertainment City

( including

amusement park-

worlds of wonder)

Noida 44## Y Y

Single entry as well

as pay as you go

option available

Rs 450 NA

Kishkinta Chennai 120 Y Y Single entry fees Rs 450 NA

Queensland Chennai 70 Y Y Single entry fees Rs 350 NA

VGP Universal Chennai NA Y Y Single entry fees Rs 200 NA

MGM Dizzee World Chennai 27 Y Y Single entry fees Rs 500 NA

GRS Fantasy Park Mysore 30 Y Y Single entry fees Rs 395 NA

Mount Opera Hyderabad 55 Y Y

Single entry as well

as pay as you go

option available

Rs 360 NA

Athisayam Madurai 40 Y* Y Single entry fees Rs 500 NA

Black Thunder Mettupalayam 65 Y* Y Single entry fees Rs 450 NA

Appu Ghar Pune NA Y - Pay as you go Approx Rs 30 per ride NA

Fun N Food village* New Delhi 10 Y Y Single entry fees Rs 300 0.5

** Ramoji Film City is a theme park

* Ocean park, Black Thunder, Athisayam and Fun N Food Village are primarily water parks with a few dry rides.

## In phase 144 acres have been developed out of planned 147 acres.


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Huge investment lined up

As discussed earlier, the rise of tourism sector augurs well for amusement park industry. A total of Rs 175

billion of investments pertaining to the 12 major projects are lined up over the next 3-4 years. The

amusement park in Surat is contributing around Rs 95-100 billion of this amount. Some of these large

projects may avail viability gap funding from the State governments. Most projects are expected to come up

in tier II and tier III cities due to difficulties faced in land acquisition. A total addition of 4500 acres of

capacity in the next 3-4 years will be one of the major drivers for the industry. As per CARE Report, 10-15%

of footfall growth is expected to be achieved over the next couple of years, which will drive the footfalls to

78-80 million.

Non Ticketing Revenue Share Also Set to Drive Growth Almost 75-80% of the total revenue of WHL comes from sale of tickets. Share of food & beverages is 15-20%,

which is significantly lower than global peers. International parks typically generate around 50% of revenue

from admission tickets. Total contribution from accommodation related revenues currently form only 2%,

which is expected to increase as amusement becomes more of a destination tourism than a single day

entertainment. The concept of integrated resorts which includes park, retail, hospitality and cultural

facilities etc. are increasingly becoming popular in India. Due to increase in disposable income, improving

life style and an increase in nuclear families, the in-park spending is expected to increase in the short to

medium term. Globally the share of non ticketing revenue is quite higher in amusement park as compared

to India. We believe the above factors will add up to the non ticketing revenue of Indian Parks.


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Age wise distribution India (2011) Visitors age profile



Footfalls of Top 25 Amusement parks Globally

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In- House Manufacturing to Boost Profitability Innovation is an important factor for generating increase in footfalls at amusement parks. WHL regularly

develops and introduces new rides and attractions. The company conducts market surveys relating to

customer preferences and benchmarks against amusement parks in other parts of the world, before

implementation, including concept testing with visitors, in house testing of rides and attractions by

company's research and development team. There are not many parks in India which is profitable; WHL is

one of the few parks which is profitable due to its operational efficiencies, in- house ride manufacturing

capability, experienced promoters and relatively less capex requirements. The company's management has

been successful in keeping the cost efficiency, while at the same time providing a memorable experience to

the visitors. The company's competitive strength lies in its in-house manufacturing facility at Wonderla Kochi

to manufacture/construct amusement rides and attractions, apart from amusement rides procured from

manufacturers within and outside India. WHL's experience in running amusement parks and understanding

customer preferences enables the company to conceptualize and develop innovative rides. This results in cost

saving to an extent of 50-60% for imported rides and approx 30% for domestic rides. The company also sends

key managerial staff to amusement parks across the world to learn more about the prevalent market trends.

As of Jan 31 2014, WHL constructed/manufactured 42 rides/ attractions. This has also helped the company to

build its in-house maintenance capabilities, thereby reducing the cost of maintenance and down-time for a

ride. Wonderla Kochi and Bengaluru have 10 and 18 rides imported respectively. Balance is either in-house or

domestically sourced. (Please refer to chart in pg no 3)

Early Mover Advantage WHL has a first-mover advantage at its existing locations, Kochi and Bengaluru. Since it set up operations

more than 14 years ago in Kochi and more than 9 years ago in Bengaluru, the company’s cost of establishment

is considerably lower than that of new entrants, which would enable it to competitively price its entry tickets.

Even at the new proposed locations such as Hyderabad, the company is likely to have an edge over any new

entrant in the industry due to its vast experience in running amusement parks. Also, the in-house ride

manufacturing and maintenance capabilities as discussed earlier are expected to keep Wonderla’s costs lower

than that of competitors. WHL's management is highly experienced in operating amusement park which we

believe is one of the key requirements to succeed in this industry.

Strong Marketing Strategy WHL derives approximately 80% of its revenues from entry fees and thus strong marketing skills are

necessary to attract footfalls on a sustainable basis and also to attract repeat visitors. Marketing and sales

promotions are done through direct and indirect modes. Under the direct mode of marketing, Wonderla’s in-

house marketing team reaches out to the potential customer base directly by conducting activities such as

personal sales, college activation plans, kiosk activity plans at college festivals, etc. The company uses the

indirect mode to widen its reach beyond the regions of its presence. It has engaged sales promotion agents

and tour operators across southern India on a revenue sharing basis. The company also has a separate

marketing team to target schools and colleges which report bulk footfalls; according to the management, 800

out of 1,000 schools located in Bengaluru visit Wonderla regularly. Also, a number of corporates conduct their

events such as annual picnic and off-sites at Wonderla’s parks.

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WHL has come up with innovative marketing strategy by launching privilege card to ensure repeat visits. The

privilege membership card comes free with a minimum purchase of four tickets at full rate without any

discounts. On the next visit, a visitor enjoys a discount ranging from 10-20% of the ticket price. Currently, 10%

of the company’s ticket revenue comes from the privilege card.

Reserved Capacity to Absorb Future Footfalls The company has excess capacity available at both the parks to absorb future footfall growth in coming years.

Current capacity for both parks is 12000 visitors per day. Company has excess land which can cater to the next

growth phase. A new ride addition or additional food stall can be successfully added on the vacant land

without incurring extra expenditure. Thus, we believe there is enough head room for the company to grow and

expand to meet the increasing demand and increasing the revenue and profitability.

Land available for future expansion

Park No of Rides

Approx Available

Land (acres)

Approx Developed

Land (acres)

Balance

Available

(acres)

Wonderla Kochi 55 93 29 64

Wonderla Bengaluru 55 82 39 43

Wonderla Hyderabad 42 50 27 23

Source: Company,MOSL, CD Research

Strong Financials & Healthy Revenue

Visibility Going Ahead WHL net sales has grown at an impressive CAGR of

20% over the last 5 years, while its net profit has

grown at more than 29% CAGR over the same

period.. We expect WHL's net sales to grow by 20.6%

in FY15e and by 20% in FY16e as the company is well

poised to take advantage of uptick in discretionary

spend and lowering inflation. Two important factors

contributing the company’s revenue are footfalls and

entry fees. Kochi Park footfalls have grown at a CAGR

of 4%, while Bengaluru Park footfalls have grown at

more than 13% CAGR over the last 5 years.

The entry fee has been increasing at a CAGR of 10.5% over FY 2010-14 and the management is confident of

growing the same at around 10%. In addition to Hyderabad Park the company is also looking for suitable

land in Chennai to open its fourth park. The company has a strong balance sheet with debt-equity ratio of

only 0.04x at the end of H1FY15.

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Risks & Concerns High Investment Business Amusement parks call for high investment and involve long gestation periods. WHL's business requires a

significant amount of capital expenditure for setting up an amusement park and also during expansion of

existing parks, to add new rides periodically to retain the repeat visitors and also towards shut down

maintenance and civil works.

Accidental Risks Any occurrence of accidents or mishaps at amusement park may expose the company to financial liabilities and

legal proceedings which may result in adverse publicity and could affect company's expansion plans, financial

conditions and results of operations.

Dependency on Southern India The company's amusement parks are situated in southern India and it primarily caters to visitors from southern

Indian cities. If southern India experiences an event negatively affecting its economy, such as a local economic

downturn, a natural disaster, a contagious disease outbreak or a terrorist attack, or if the local authorities adopt

regulations that place additional restrictions or burdens on this industry in general, the company's overall

business may weaken.

Revenue Loss A major portion of company's revenue is derived from sale of entry tickets as compared to income from sale of

merchandise and food and beverages. If the company is faced with competition from other amusement parks

and are forced to lower the prices of entry tickets, it may adversely affect company's revenue.

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Changes in Consumer Preferences The company is sensitive to changing consumer preferences including changes in consumer taste and

acceptance of amusement park concept as it is a part of discretionary spending. Any change in consumer

preferences that may decrease demand for offerings or the acceptance of amusement park concept could cause

decrease in the number of footfalls to parks.

Failure to maintain Brand Value The company has invested significantly and will continue to invest in marketing and advertising programs to

preserve and enhance their brand. If the company is unable to successfully and cost effectively promote their

brand then the goodwill of the company and ability to compete and increase the number of visitors at the

theme park will be adversely affected.

Foreign Exchange Fluctuations The company purchases rides and equipments from a number of foreign suppliers in foreign currency. The

company does not hedge against currency rate fluctuations on account of duration of purchase contract.

Therefore the company may face a degree of foreign exchange risk which may have a material effect on cash

flows, revenues and profitability.

Seasonal Business

It must be kept in mind that amusement park business is a seasonal business, where Q1 and Q3 are the best

periods for the company and generates maximum revenue compared to the other 2 quarters. Footfalls are

lower in Q2 and Q4 owing to monsoon and examination season. Q1 and Q3 on an average contribute more

than 60% to the overall top line of the company.


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Financials

Quarterly Results Figures in Rs cr

Q3FY15 Q3FY14 % chg. 9MFY15 9MFY14 % chg.

Revenue from Operations 47.36 41.02 15.4 145.41 119.69 21.5

Other Income 2.12 0.55 286.5 7.36 1.86 296.1

Total Income 49.47 41.57 19.0 152.77 121.55 25.7

Total Expenditure 26.47 21.80 21.4 75.05 63.53 18.1

PBIDT 23.01 19.77 16.4 77.72 58.02 34.0

Interest 0.45 0.38 18.0 1.25 1.20 4.4

Depreciation 4.04 3.98 1.5 12.11 10.12 19.7

PBT 18.52 15.40 20.2 64.36 46.70 37.8

Tax 5.75 3.01 91.3 20.31 13.96 45.5

Reported PAT 12.77 12.39 3.0 44.04 32.74 34.5

Extraordinary Item - - - - - -

Adjusted Net Profit 12.77 12.39 3.0 44.04 32.74 34.5 EPS- Basic (F.V. 10) 2.26 2.95 -23.4 7.80 7.80 0.0

EPS- Diluted (F.V.10) 2.26 2.19 3.0 7.80 5.79 34.5

Income Statement Figures in Rs cr

FY12 FY13 FY14 FY15e FY16e

Revenue from Operations 113.13 137.85 153.63 185.32 222.39

Growth (%) 26.2 21.9 11.4 20.6 20.0

Other Income 1.39 1.52 2.38 9.48 6.64

Total Income 114.52 139.37 156.01 194.80 229.02

Total Expenditure 57.38 75.03 82.98 96.70 115.97

EBITDA 57.14 64.34 73.03 98.11 113.05

Interest 1.13 2.46 1.92 1.67 1.30

PBDT 56.01 61.88 71.11 96.44 111.75

Depreciation 11.56 11.84 13.20 16.80 18.90

Tax 14.41 16.45 18.02 25.14 28.44

Reported PAT 30.04 33.59 39.89 54.49 64.41

Extraordinary Item - 0.01 -0.02 - -

Adjusted Net Profit 30.04 33.58 39.91 54.49 64.41

EPS (Rs.)- Basic 7.15 8.00 9.50 9.64 11.40

EPS(Rs)- Diluted 5.32 5.94 7.06 9.64 11.40

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Balance Sheet Figures in Rs cr


SOURCES OF FUNDS

Share Capital 42.00 42.00 42.00 56.50 56.50

Reserves 51.76 77.95 107.93 300.36 364.13

Total Shareholders Funds 93.76 119.95 149.93 356.86 420.63

Long term debt 16.10 12.43 19.43 11.60 9.28

Total Liabilities 109.86 132.38 169.36 368.46 429.91

APPLICATION OF FUNDS

Gross Block 207.80 242.03 255.33 375.33 510.33

Less: Accumulated Depreciation 86.78 98.08 109.88 126.68 145.58

Net Block 121.02 143.95 145.45 248.65 364.75

Capital Work in Progress 4.37 5.72 20.07 5.50 4.50

Investments - - - - -

Current Assets

Inventory 1.82 2.81 3.34 4.80 5.20

Sundry Debtors 0.20 0.49 0.34 0.47 0.56

Cash and Bank 2.48 2.87 20.04 139.26 86.09

Loans and Advances 1.45 2.57 4.27 2.16 2.16

Total CA & LA 5.95 8.74 27.99 146.69 94.01

Current liabilities 16.21 17.13 13.47 17.53 18.50

Provisions 9.60 11.23 12.47 12.86 12.86

Total Current Liabilities 25.81 28.36 25.94 30.39 31.36

Net Current Assets -19.86 -19.62 2.05 116.30 62.65

Net Deferred Tax -3.57 -3.70 -3.35 -3.35 -3.35

Other Assets (Net Of Liabilities) 7.90 6.03 5.14 1.36 1.36

Total Assets 109.86 132.38 169.36 368.46 429.91

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*18 months results due to change in fiscal year (Oct 12 – Mar 14)

Key Financial Ratios


Growth Ratios

Revenue (%) 26.2 21.9 11.4 20.6 20.0

PBIDT (%) -2.0 12.6 13.5 34.3 15.2

Net Profit (%) 0.9 11.8 18.9 36.5 18.2

EPS (%) - Diluted 1.0 11.7 18.9 36.6 18.2

Margins

Operating Profit Margin (%) 49.3 45.6 46.0 47.8 47.9

Net Profit Margin (%) 26.6 24.4 26.0 29.4 29.0

Return

ROCE (%) 44.2 40.5 37.6 22.2 22.0

RONW (%) 36.5 31.4 29.6 15.3 15.3

Valuations

Market Cap / Sales - - - 8.5 7.1

EV/EBIDTA - - - 15.2 13.6

P/E - - - 29.1 24.6

P / BV - - - 4.4 3.8

Other Ratios

Debt-Equity 0.2 0.2 0.2 0.1 0.1

Current Ratio 0.2 0.3 1.1 4.8 3.0

Interest Coverage 40.3 21.3 31.2 48.7 72.4

Turnover Ratios

Fixed Asset 0.6 0.6 0.6 0.5 0.4

Total Asset 1.1 1.0 1.0 0.5 0.5

Debtors 491.9 399.6 370.2 398.1 398.1

WC Ratios

Debtor Days 1.0 1.0 1.0 1.0 1.0

Inventory Days 5.9 7.4 7.9 7.9 7.9

Creditor Days 19.0 19.0 19.0 19.0 19.0

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Recommendation

Wonderla Holidays Ltd. (WHL) is one of the largest operators of amusement parks in India. It owns and operates

two amusement parks under the brand name "Wonderla", situated at Kochi and Bengaluru. It has also developed a

Wonderla resort in Bengaluru, a three star leisure resort next to its amusement park which has been operational

since March 2012. The company's amusement parks offer a wide range of water and land based attractions catering

to all age groups. The rides are a mix of imported, domestically procured and in-house manufactured. In FY14, it

had an annual cumulative footfall 22.9 lakhs. The company had raised Rs 181.25 cr via IPO in CY14 to set up its

third park in Hyderabad. It is expected to be operational from last quarter of FY16 or beginning of FY17. At

Hyderabad Park the company is estimating a footfall of 700000 in the first year with operating margin of roughly

30%.

In India amusement park industry has witnessed a gradual and successful journey. From just one Appu Ghar in

1984 to over 150 amusement parks in 2013 spread across India. The Indian Amusement Park Industry is still at a

nascent stage of growth and is highly under penetrated. The country’s amusement parks industry, with 150

players, generated revenues of over Rs1800 cr in FY13. As per IAAPI estimates revenues will more than double to

Rs 4000 cr by 2020. The main growth drivers would be rising discretionary spend on account of increasing per

capita income, favorable demographic structure, lack of entertainment options and government thrust on tourism

sector. India’s discretionary expenditure is increasing at a rapid pace and is expected to rise further in coming

years on account of higher per capita income and large young population. More than 65% of India’s population is

below the age of 35 years, which augurs well for amusement park industry. India is one of the youngest countries

in the world with the median age of 26.5 years, compared to 37.1 years in US, 45.4 years in Japan and 35.9 years in

China.

The company's competitive strength lies in its in-house manufacturing facility at Wonderla Kochi to

manufacture/construct amusement rides and attractions, apart from amusement rides procured from

manufacturers within and outside India. As of Jan 31 2014, WHL constructed/manufactured 42 rides/ attractions.

This has helped the company to reduce capex incurred on the rides; as per the management, the cost of a ride

manufactured in-house is one-third of the cost of procuring the ride externally.

WHL’s net sales has grown at an impressive CAGR of 20% over the last 5 years, while its net profit has grown at

more than 29% CAGR over the same period. We expect company’s net sales to grow by 20.6% in FY15e and by

20% in FY16e on account of increasing per capita income and rising discretionary spending. Two important factors

contributing to the company’s revenue are footfalls and entry fees. Kochi Park footfalls have grown at a CAGR of

4%, while Bengaluru Park footfalls have grown at more than 13% CAGR over the last 5 years. The entry fee has

been increasing at a CAGR of 10.5% over FY 2010-14 and the management is confident of growing the same at

around 10%. In addition to Hyderabad Park the company is also looking for suitable land in Chennai to open its

fourth park. The company has a strong balance sheet with debt-equity ratio of only 0.04x at the end of H1FY15.

The stock is currently trading at 29.1x FY15e of Rs 9.64 and 24.6x FY16e of Rs 11.40.However, looking at the

earnings growth, strong balance sheet and the expansion plan, we assign a buy on the stock with a target price of

Rs 342, based on 30x FY16e, over a period of 9-12 months.

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