Awfis Space Solutions Is IIFL's Top Bet In Flexi Workspaces As It Initiates Coverage

IIFL Securities Ltd. has initiated coverage on Awfis Space Solutions with a 'buy' rating and a target price of Rs 920 per share, implying an upside potential of 45% from the current market price, citing it as the only listed pure play in the flexible workspaces segment.

Awfis' unique position in the industry, combined with strong growth prospects, has led IIFL to forecast a 33% compound annual growth rate in seat additions over the next few years, nearly doubling its capacity by fiscal 2027.

The company listed on the exchanges on May 30 at Rs 435 apiece. The stock has risen over 4% on Monday and the day's high is 63.4% higher than its listing price.

Awfis, the largest network of flexible workspace centres in India, is set to expand its seat capacity by over 100% by fiscal 2027. The company plans to add 40,000 to 50,000 seats per annum, supported by the rising demand for flexible office spaces as businesses adopt the "core + flex" strategy.

According to IIFL, this growth will be fuelled by a steady improvement in occupancy levels (to 85%) and increasing tenant lock-ins, which will help mitigate asset liability mismatches.

One of Awfis' key strengths is its managed aggregation model, where landlords share the capex of centre fit-outs, enabling a faster payback period and superior return on capital employed. With 64-67% of its centres under managed aggregation, Awfis has enhanced its return ratios and operating efficiency.

This strategy allows for a more efficient use of working capital and positions the company for long-term success, even as it ramps up its capital expenditures.

The flexible office space industry in India, now responsible for more than 20% of total office leasing, continues to experience strong tailwinds. The shift towards hybrid working models and the growing demand for flexible workspaces are driving industry growth.

Awfis, with its established infrastructure and aggressive expansion plans, is well-positioned to capture a significant portion of this expanding market. IIFL projects a 55% Ebitda CAGR for the company between fiscal 2024 to 2027, driven by its expanding network, improved occupancy management, and a strong ancillary services business, including design and build solutions.

Awfis Space stock rose as much as 4.43% during the day to Rs 711 apiece on the NSE. It was trading 2.09% higher at Rs 695.05 apiece, compared to a 1.72% advance in the benchmark Nifty 50 as of 11:29 a.m.

Five analysts tracking the stock have a 'buy' rating on the stock, according to Bloomberg data. The average of 12-month analysts' consensus price target implies a potential upside of 43.5%.