Buy Westlife Foodworld; target of Rs 852: Prabhudas Lilladher

Prabhudas Lilladher's research report on Westlife Foodworld

We cut our FY23/24/25 EPS estimates by 1.9%/2.7%/2.6% on account of 1) milder GM expansion in FY24/25 and 2) higher overheads from faster refurbishment of non-EOTF stores. WFL’s results remain encouraging in a challenging environment for discretionary/QSR names. RM basket appears to have stabilized with ~2% blended price hike across the portfolio (7% for 12 months). WFL continues to gain market share across territories with menu innovations like Fried Chicken (South India) and Gourmet Burgers. OnPremise continues to gain momentum with 23% higher sales while offpremise remains strong at 85% higher sales than pre covid levels. We remain positive on the structural story for Westlife given 1) guidance of 580-630 stores by CY27 (35/40 in FY23) 2) increased traction on fried chicken & new launches like chicken wings yielding additional Rs10mn of AUV/store (Rs5mn earlier) 3) strong start in Tier2/3 with growth being 1.5x than metros and 4) likelihood of gradual increase in royalty beyond 5% after FY26.

Outlook

We estimate Sales CAGR of 27.1% over FY22-25 with an EPS of Rs7.9/Rs11.2/Rs14.7 in FY23/24/25. We maintain DCF based target price of Rs852 (Rs854 earlier). Buy for LT Gains given huge scope to scale up a strong brand with clear focus.