Up 83% from IPO price! IIFL Securities initiates coverage on Awfis Space Solutions with ‘Buy’, sees 40% upside

Domestic brokerage firm IIFL Securities has initiated coverage on Awfis Space Solutions with a 'buy' recommendation and a target price of ₹980 per share. This implies a 40 per cent upside potential from its last closing price of ₹700.75. The brokerage highlighted Awfis as the only listed pure-play company in the flexible workspaces segment, citing robust growth prospects and a unique business model as key drivers for its bullish outlook.

Stock Price Performance

Awfis has witnessed a remarkable rally since its market debut. The stock was listed at ₹435 on May 30, 2024, representing a 61 per cent gain from its listing price and an 83 per cent rise from its IPO price of ₹383. While the stock reached an all-time high of ₹945.70 in August 2024, it currently trades 26 per cent below its peak. Despite this, the scrip has gained 88.5 per cent from its 52-week low of ₹371.75, recorded in June 2024.

In November, the stock climbed over 6 per cent after consecutive losses in the prior two months, falling 2.8 per cent in October and 7 per cent in September. Previously, Awfis delivered positive returns for three straight months (June-August) following its listing.

INVESTMENT RATIONALE

Expansion Plans and Growth Prospects

Awfis, India’s largest network of flexible workspace centers, plans to double its seating capacity by fiscal 2027. The company aims to add 40,000 to 50,000 seats annually, riding on the rising demand for flexible office solutions as businesses increasingly adopt "core + flex" models.

IIFL Securities projects a 33 percent compound annual growth rate (CAGR) in seat additions over the next few years. Occupancy rates are expected to improve to 85 percent, supported by increasing tenant lock-ins, which will help mitigate asset-liability mismatches.

Business Model Driving Efficiency

Awfis' managed aggregation model is a significant contributor to its operational success. Under this approach, landlords share the capital expenditure for centre fit-outs, enabling a quicker payback period and higher returns on capital employed. With 64-67 per cent of its centres operating under this model, the company has achieved enhanced return ratios and improved operating efficiency, said the brokerage.

This asset-light strategy allows Awfis to optimise its working capital while maintaining a strong growth trajectory, even as it ramps up capital expenditures, IIFL Securities added.

Industry Dynamics Favor Growth

The flexible office space industry in India, which now accounts for over 20 per cent of total office leasing, continues to grow rapidly. The shift towards hybrid work models and increasing demand for flexible workspaces provide strong tailwinds for the sector.

IIFL Securities believes with an established presence and aggressive expansion plans, Awfis is well-positioned to capitalise on these trends. It estimates a 55 per cent EBITDA CAGR for the company between fiscal 2024 and 2027, driven by its expanding network, improved occupancy management, and a growing ancillary services segment, including design and build solutions.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.