Accumulate Westlife Foodworld; target of Rs 844: Prabhudas Lilladher

Prabhudas Lilladher's research report on Westlife Foodworld

We cut FY24/25 EPS estimates by 20.8/23.3% following disappointing SSG of 1% and 7.1% decline in PAT in 1H24. While a bit of slackness can be attributed to high base but the impact of poor consumer sentiment and high inflation has resulted in a shift of consumer preference to other eating out options, which has impacted WFL. While WFL does not any inflationary pressures, reversal in demand trends will take some time. Long term growth drivers remain intact with focus on 1) Burger, chicken and Coffee combos and Mcsaver meals 2) guidance of 580-630 stores by CY27 (40/45 in FY24) 2) menu innovations and limited edition launches from time to time 3) increased traction on fried chicken and 4) flexibility of format with relevance across Metros, Tier 1, Mid-tier towns and Highways.

Outlook

We estimate Sales/EPS CAGR of 16.1%/20.4% over FY23-26E., we expect back ended returns linked to improved consumer sentiment and demand recovery. Maintain ‘Hold’ with DCF based TP of Rs844 (Rs958 earlier).