Reduce Westlife Foodworld: target of Rs 480: ICICI Securities

Moneycontrol • 6 days ago

Original source

Key Investment Pillars

  • Demand recovery: Westlife Foodworld reported 16.3% YoY revenue growth and 10.1% SSSG in Q2FY27, driven by double-digit guest count growth and broad-based gains across regions and channels.
  • Margin concerns: Despite strong demand, margins have lagged due to cost inflation in wages, utilities, and commodities, with restaurant operating margin flat YoY at 19.3%.
  • Expansion plans: The company plans to add 60-65 restaurants a year, with a target of 580+ stores by FY28, and has reiterated its guidance of 100-150bps annual margin improvement.
  • Valuation: We maintain a REDUCE stance with a DCF-based target price of INR 480, citing limited near-term triggers for meaningful margin expansion.

Thesis Validation Checklist

  • Watch for margin improvement: Investors should monitor Westlife's ability to improve margins, particularly through cost discipline and operating leverage.
  • Demand sustainability: Sustained demand growth and positive SSSG will be crucial in validating the investment thesis.
  • Expansion progress: Tracking the company's expansion plans and store additions will be essential in assessing its growth potential.
  • Industry trends: Monitoring industry trends, including competition and consumer behavior, will help investors gauge Westlife's positioning and prospects.