Motilal Oswal's research report on Westlife Foodworld
WESTLIFE reported soft revenue growth of 7% YoY in 2QFY24, due to weak SSSG at 1% (est. 5%). Revenue growth was aided by store additions. EBITDA margin declined 80bp YoY, which, along with GM impact, resulted in a 29% YoY decline in PAT (35% miss). While the current market environment remains soft, the management anticipates high single-digit SSSG and the addition of 40-45 new restaurants in FY24. Easing commodity pressures and focus on growing average unit volume are key positive factors, which could be offset by an increase in royalty. We reiterate our Neutral rating on the stock.
Outlook
Our valuation at 30x pre-Ind AS FY25E EV/EBITDA leads to a TP of INR850. Easing commodity pressure and the company’s focus on growing its average unit volume are the key positive factors. These factors could be partly offset by an increase in royalty. We reiterate our Neutral rating on the stock.
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