Prabhudas Lilladher's research report on Westlife Foodworld
We cut FY25/26 EPS estimates by 7.4%/7.9% following decline of 5% in SSG, miss on margins and benign growth outlook in 1H25. Sales were impacted by sustained poor sentiments in some geographies (70-80 stores) led by external issues (Geopolitical/cheese issues), situation is improving but at a slower rate. We expect WFL to return to positive SSG by fag end of 2Q/3Q only, which along with higher overheads on new stores and accelerated store openings will affect margins and profitability in 1H25. WFL does not have any inflationary pressures, however reversal in demand trends are a key monitorable in near term. Long term growth drivers remain intact with focus on 1) Burger, chicken and Coffee combos and Mcsaver meals 2) guidance of 580-630 stores by CY27 (40/45 in FY25) 2) menu innovations in café & value burgers with limited edition launches and offers from time to time 3) increased traction in fried chicken and 4) flexibility of format with relevance across Metros, Tier 1, Midtier towns and Highways.
Outlook
We estimate EPS CAGR of 42.2% over FY24-26E. We assign DCF based target price of Rs815 (Rs820 earlier) Retain ‘Hold’.
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