Dreamfolks Services, a recent debutant of Dalal Street, has received a 'buy' tag from the domestic brokerage Equirus. The brokerage firm sees an up to 36 per cent upside potential in the company, which is India's largest airport service aggregator platform.
Equirus has initiated coverage on Dreamfolks Services with a 'long' rating and target price of Rs 506 on the stock, citing strong growth prospects, healthy profitability and return ratios. Its target is more than 37 per cent higher than its previous close at Rs 371. However, the counter hit a high of Rs 550 on September 6, 2022, its listing date.
Dreamfolks is in a sweet spot to capitalize on the market’s huge untapped potential stemming from 9 times growth in air passenger traffic by CY40, India’s low credit card penetration at 3 per cent and Government initiatives, said Equirus. Privatization of airports would propel growth for the airport lounge industry, benefitting airport service aggregators, said the brokerage.
"100 per cent lounge coverage, tie-ups with majority card operators and issuers and in-house technology gives DreamFolks a first mover advantage, dominance and creates interdependence among players," it said. The company has established a solid foothold with a 68 per cent market shares in the Indian airport lounge access.
Dreamfolks works on a asset light business model. "With minimal capex, negligible debt and working capital requirements, it has been able to generate superior return ratios and the trend is likely to continue given no major capex plans," Equirus said.
Sunil Singhania picked up fresh stake in Dreamfolks Services during December 2022 quarter as per the latest shareholding of the company. The Abakkus Growth Fund-II managed by the superstar fund manager owned 9,50,000 shares or 1.82 per cent stake of the company.
Equirus has highlighted less-than expected air passenger traffic, reduction in MDR and sales & promotion expenses by banks, pandemic-related disruptions and changes in government policies as the key risks to the Dreamfolks.
Dreamfolks Services raised Rs 562.1 crore via its initial public offering between August 24-26, 2022. It sold its shares in the range of Rs 308-326 apiece, which were listed at Rs 505, a premium of 55 per cent over its issue price. The stock hit the low of Rs 348.20 on December 27, 2022, after correcting 37 per cent from its highest level.
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