Exceptional performance in Q2FY25 with highest topline and profits in its history
• Company reported Q2 FY’25 revenue growth of 40% YoY, reaching ₹292 crores
• Co-working and Allied Services segment revenue was up by 43% and reached ₹218 crores.
• Construction and Fit-Out Projects segment reported ₹68 crores, saw 36% growth
• EBITDA up by 67% YoY to ₹100 crores; EBITDA margin of 34.3% (+550 bps YoY).
• Overall monthly occupancy rate was at 73%, while with centers operational for over 12 months it reached 84%
• 110k+ operational seats across 180 centers; total capacity 150k seats across 224 centers
• Management anticipates upside potential to initial guidance of 30% revenue growth and improvement in margins
Margin improvements supported by management’s well set plan of moving to Asset Light Business Model along with moving into premium workspace solutions
1) Shifting to Asset Lite Model under MA (Managed Aggregation model) agreements, where capital expenditure per seat has halved thereby offering early breakeven
• By end of Q2, 67% of seats under managed aggregation model, aligning with an asset-light, risk-averse strategy.
2) Launched first Elite Center in Hyderabad, aimed at premium workspace solutions, with expected seat realization 40%-45% higher than Awfis products.
Expansion Strategy to increase presence in Tier 1 and Tier 2 cities will add further scale
1. The company operates in 9 Tier 1 and 7 Tier 2 cities, with plans to expand into high-demand micro-markets within Tier 1 cities. It also aims to enter new Tier 2 cities like Lucknow, Guwahati, and Vijayawada. Additionally, it intends to upgrade workspaces in prime micro-markets of Tier 1 cities.
2. Significant expansion in Tier-2 cities, now present in 20 centers across regions including Ahmedabad, Guwahati, and Indore
During listing the company was not profitable at PBT level. In last 2 quarters as the price is consolidating the company has posted profits with increasing sales and improving margins.
At current level, stock is trading at 5x Market cap/ Sales and 12x Price/ book value. Company is generating Rs.9 crore per 1k operational seating. Company has already set a target of 135 operation seats by end of FY25 which could translate into expected sales of ~Rs. 1231 crore and PAT of Rs.39 cr giving it expected EPS of Rs13 and 55x PE
Expecting the company to grow at current 40% y-o-y (lower range of growth for last 3 years) it will generate Rs2400+ crore in next 2 years generating a PAT of Rs.135 crore (at 6%)
This means that Awfis share price is trading at only 16x 2 year forward PE and 2.1x Sales to Market Cap there by offering a significant upside from current levels
Report of Awfis Space Solutions
I recommend a Buy at current market price of 730 with expectation that price could double in the next 1 year