22 April 2016
Downgrade to Neutral
Multiple headwinds ahead
Cutting estimates; downgrading to Neutral
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val ( INR m)
Free float (%)
Post our recent conversation with the management, we surmise that footfall growth
at WONH’s recently launched Hyderabad Park would be slower than we had
Footfalls at its Bangalore and Kochi Parks have been impacted by the ongoing heat
wave and forecasts of an above-average monsoon do not portend well.
Launch of new park coupled with lower than average price hikes (~5% against
historical levels of ~10%) in existing parks will lead to EBITDA margin decline of
450bp in FY17.
We are cutting our estimates and downgrading our stock rating to Neutral in light of
the near-term challenges.
Financials Snapshot (INR b)
2016E 2017E 2018E
Shareholding pattern (%)
Dec-15 Sep-15 Dec-14
Management expects footfalls of 0.7m for the Hyderabad Park in FY17
The Hyderabad Park had a pre-launch in the first week of April, followed by an
official launch on April 20, 2016. Within the first 10 days, the park achieved
footfalls of ~50,000. WONH targets footfalls of 0.7m in FY17, which it expects to
ramp up to 1m/year in three years. The management highlights that footfalls in the
second year are usually flattish; the ramp-up happens post that due to word of
mouth publicity. We now factor in footfalls of 0.7m in FY17, with growth of 15% in
FY18 (v/s 30% estimated earlier).
Guides revenue of INR650m from Hyderabad Park, with margins at 25-30%
The management expects F&B realization to be INR150, net ticket realization (net
of tax) to be INR650 and other realizations to be INR100. Overall, it targets gross
revenue of INR600m-650m from the Hyderabad Park in FY17. It expects margins of
25-30%, which could expand to 30-35% in FY18, if annual footfalls are close to 1m
then. WONH targets ad spends of INR80m for the Hyderabad Park in FY17, close to
13% of revenue, higher than the normal 10% annual target, given first year of
FII Includes depository receipts
Stock Performance (1-year)
Sensex - Rebased
Bangalore and Kochi Parks seeing slowdown in footfalls due to extreme
The management highlighted that footfalls might get impacted due to early onset
of summer in 4QFY16 (4Q is also the weakest quarter, usually) and the ongoing
heat wave across India in 1QFY17. Temperatures are soaring above 40 degrees in
Kochi and Bangalore. At such temperatures, people prefer indoor alternatives like
malls to open air theme parks. The Indian Meteorological Department as well as
SkyMet have predicted above average monsoon in 2016. This too could adversely
impact footfalls; historically, heavy rainfall has deterred footfalls. We now factor in
a footfall growth of 3% for FY17, as against our earlier estimate of 4%.
(Niket.Shah@MotilalOswal.com); +91 22 39825426
Investors are advised to refer through important disclosures made at the last page of the Research Report.
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