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Motilal Oswal Report
Westlife Development Ltd. delivered a strong operating performance surpassing our estimates.
Dine-in recovered to pre-Covid levels while the convenience channel (delivery, on-the-go, and drive-throughs) sales continued to remain elevated – resulting in Westlife Development's same-sore sales growth of 97% in Q1 FY23 (our estimate: Rs 76%).
The full impact of the 5% price hikes taken towards end-Q1 FY23 should be reflected in Q2 FY23E leading to sequentially improved margins.
The management stated that FY23E royalty rates would be 4%, rising to 4.5% in FY24E and 5% in FY25/FY26E. It is in talks with McDonald's Corp to stagger the royalty rate increases beyond this as opposed to being sharply increased to 8% in FY27E as per the current franchise agreement. This offers better visibility on earnings over the next four years.
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