Prabhudas Lilladher's research report on Westlife Foodworld
We cut FY25/26/27 EPS estimates by 65/35/35% following sustained pressure on demand resulting in a decline of 6.5% in SSG and impact of reverse operating leverage. Sales were affected by sustained poor sentiments in some geographies (70-80 stores) led by Geopolitical issues, which are waning off at a very slow pace. We expect WFL to return to positive SSG by fag end of 3Q given low base, however higher overheads on new stores and accelerated store openings will continue to impact profitability. We note that sales/store/Qtr has declined to ~15.3mn from a peak of Rs18mn and recovery seems delayed given heighted competition and recent rise in food inflation. WFL, which earlier had no impact of RM inflation, is facing challenges amid increase in prices of edible oils and fresh produce due to weather variations.
Outlook
We assign DCF based target price of Rs797 (Rs889 earlier). Retain Hold; recovery in demand is a key risk to our call.
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