Hold Westlife Foodworld; target of Rs 738 Prabhudas Lilladher

Prabhudas Lilladher's research report on Westlife Foodworld

WFL outlook remains cautious in the near term given 1) TTM Average sales/store declined 5.8% YoY and 13% QoQ as demand scenario remains challenging 2) muted guidance for SSG for FY26 despite low base of FY25 and more focus on CY27 guidance 3) limited pricing power as sustained competitive intensity is likely to cap price hikes. Although operational efficiencies will neutralize RM inflation, higher overheads on new stores will curtail margins to 190bps lower than FY23 peak on Pre INDAS basis. Long term growth drivers are intact with focus on 1) Burger, chicken and Coffee combos and Mcsaver meals 2) guidance of 580-630 stores by CY27 (45/50 in FY25) 2) menu innovations in café & value burgers with limited edition launches and offers from time to time 3) increased traction in chicken offerings and 4) flexibility of format with relevance across Metros, Tier 1, Mid-tier towns and Highways.

Outlook

We cut FY26/27 EPS by 21.7/10.6% even as we factor in sales/store growth of 5% and 6.5%, which seems a tall order as of now. WFL trades at 28xFY27 Pre INDAS EV/EBIDTA. We roll forward and assign DCF based target price of Rs738 (Rs777 earlier). Retain Hold.

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