Accumulate Westlife Foodworld; target of Rs 932: Prabhudas Lilladher

Prabhudas Lilladher's research report on Westlife Foodworld

We retain ‘Accumulate’ rating on WFL given 1) sustained traction in their menu with 7% SSG in tough operating environment 2) strong financials with 70bps post IND AS (down 10bps Pre IND AS) margin expansion YoY, despite 60bps royalty increase and 3) menu adjustments with launch of Mcsaver Meals to attract new customers. Medium term growth story remains intact with Burger, chicken and Coffee combos in our view. We remain constructive on WFL’s structural story given 1) 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 (June had highest ever chicken sales) and 4) flexibility of format with relevance across Metros, Tier 1, Mid-tier towns and Highways.

Outlook

We estimate Sales/EPS CAGR of 17.7%/33.3% over FY23-25. Maintain ‘Accumulate’ at DCF based TP of Rs932 (Rs800 earlier) for LT gains, although incremental gains will be back ended post sharp run up in the recent stock price.