Buy Westlife Foodworld; target of Rs 915: Emkay Global Financial

Emkay Global Financial's research report on Westlife Foodworld

In line with expectations, WLDL reported a robust 22% revenue growth in Q4, led by best-in-class SSG at 14% and 16 store additions (vs. the 5-6 quarterly average). Despite weak macros, WLDL is targeting 40-45 store additions (vs. 35 in FY23) and has guided for a strong 8% SSG in FY24 (vs. our expectation of 6% SSG). WLDL believes the format provides potential to add/scale new brand extensions, which should help it deliver a sturdy SSG in a weak environment as well. Gross margin exit at 68.2% (+320bps) was strong, though higher HO costs restricted EBITDA margin gains to 50bps (vs. likely decline for peers).

Outlook

WLDL expects sustaining such levels in FY24 (vs. 66.2% in FY23) which, combined with a better SSG outlook, drive a 4-7% raise to our FY25/26 estimates. A 3M rollover drives a higher increase in TP to Rs915/sh (29x EBITDA vs. 30x earlier). Reduction in the multiple is led by 3M rollover.

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