Jefferies, JMFL see up to 52% upside in this flexible workspace stock under Rs 650

WeWork India is expanding its flexible workspace network, but its next phase of growth will depend on how quickly newly added desks translate into higher occupancy and stronger earnings. The company has continued adding capacity while improving margins, and its growing contribution from value-added services is providing another source of revenue. Jefferies and JM Financial Institutional Securities (JMFL) see further earnings growth as new centres mature and operating efficiencies improve.

“P&L beat, improving margins.” Jefferies used this phrase to describe WeWork India’s September-quarter performance. The brokerage maintained its ‘Buy’ rating with a price target of Rs 950, implying 52% upside.

Revenue rose 34% year on year and 12% sequentially to Rs 768 crore in the September quarter. Core rental revenue increased 32% year-on-year to Rs 660 crore, supported by a 33% increase in occupied desks. Adjusted EBITDA rose 42% year on year and 26% sequentially to Rs 160 crore, while the EBITDA margin expanded by 1.5 percentage points year on year to 21%.

Jefferies said management expected further margin expansion as capacity additions made earlier in the year ramped up. EBITDA margins for FY28 were indicated at around 22% to 23%, depending on the pace and timing of capacity additions.

The brokerage also described the company’s capacity expansion as being absorbed well. Operational desk capacity increased by about 11,700 desks during the quarter, taking total capacity to 1,45,300 desks. Another 4,000 to 4,500 desks had been added in October, bringing capacity to the lower end of the company’s target of 1,50,000 to 1,55,000 desks by March 2027.

Portfolio occupancy improved by 3.6 percentage points year on year to 83.7%, while occupancy at mature centres reached about 88%. The sequential decline in overall occupancy reflected the ramp-up of newly added capacity.

Locked-in contract revenue rose 66% year on year to Rs 3,840 crore, significantly outpacing locked-in rental costs. This resulted in a locked-in revenue-to-rent ratio of 2.7 times.

Jefferies raised its estimates and expected revenue and EBITDA to grow by 28% and 37%, respectively, in FY27. Between FY26 and FY29, it projected compound annual growth of 23% in revenue and 29% in EBITDA, supported by demand for flexible workspaces, premium pricing and operating leverage.

The brokerage based its Rs 950 price target on 14 times estimated September 2028 enterprise value to EBITDA. Its upside case was Rs 1,100, while its downside case was Rs 600. Risks included a sharp downturn in office demand, slower desk additions and increased competition.

“Margin-led earnings beat; trajectory remains upward.” JMFL used this description in its September-quarter report and retained its ‘Buy’ rating with a price target of Rs 850, implying 35.8% upside.

The brokerage reported revenue of Rs 766.5 crore, up 33% year on year and 12% sequentially, exceeding its estimate by 4%. EBITDA increased 42% year on year and 26% quarter on quarter to Rs 160.7 crore, beating JMFL’s estimate by 12%. The EBITDA margin expanded by 146 basis points year on year and 240 basis points sequentially to 21%.

Core rental income stood at Rs 680 crore, up 34% year on year. Value-added services and digital products grew 27% and 46%, respectively, and together accounted for 14% of revenue, above JMFL’s estimate of 12%.

The company added about 11,700 desks during the quarter, with a substantial share of the new seats belonging to the managed segment. JMFL said the annual seat-addition target had largely been achieved and expected margins to improve towards the end of the financial year as the portfolio ramped up and rent-free periods expired.

Operational capacity reached 1,45,300 seats, with overall occupancy at 83.7%. The mature portfolio comprised 1,20,300 seats and had occupancy of 87.7%, while growth centres, with around 25,000 seats, had occupancy of 65%.

JMFL said WeWork India added 18,400 seats in the first half of FY27, followed by around 4,500 desks in October. With desk additions expected to moderate in the second half, the brokerage anticipated further margin improvement, particularly towards the fourth quarter.

The brokerage raised its FY27 and FY28 IGAAP EBITDA estimates by 3% to 5% following the strong first-half performance. It expects revenue and EBITDA to compound at 22% and 27%, respectively, between FY26 and FY29, supported by additional seats and annual average revenue per member growth of 5%.

JMFL also highlighted improving cash generation. Operating cash flow reached Rs 230 crore in the September quarter, up 143% year on year, while free cash flow turned positive at Rs 61.9 crore. The company moved to a net cash position of Rs 23.1 crore at the end of the quarter, compared with net debt of Rs 31.6 crore in the preceding quarter.

JMFL retained its Rs 850 target while reducing the valuation multiple applied to estimated September 2028 enterprise value to EBITDA to 13 times from 15 times.

Both Jefferies and JMFL expect earnings to benefit as newly added desks mature and occupancy improves for WeWork. Jefferies also cited WeWork India’s premium brand, locations in Grade A buildings and enterprise customer base as strengths supporting pricing and growth.

The pace at which new desks fill up will be central to the company’s earnings outlook. Slower occupancy gains, weaker office demand or increased competition could weigh on pricing and margins. Continued demand for flexible workspaces, higher utilisation and the maturation of recently added centres could support the growth projected by both brokerages.