Westlife Foodworld Q1 Results Review Yes Securities Downgrades To 'Add', Says Recent Run-Up Limits Upside

Westlife Foodworld's Q1 FY26 topline grew by 6.7% YoY to Rs 6.6 billion (vs estimate Rs 6.7 billion) led by same-store sales growth of 0.6% YoY (vs estimate 1.5%). Ebitda came in at Rs 855 million (vs estimate Rs 822 million). The Company reported adjusted profit of Rs 15 million vs estimate of Rs 10 million.

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Yes Securities Report

With gradual improvement in Westlife Foodworld Ltd.'s growth, we are now building ~5% same store sales growth CAGR over FY25-27E on a low base of FY25. This, along with aggressive store expansion should lead to 11.2% revenue CAGR over FY25-27E.

Growth going forward will be driven by transactions without any impact on average check size. The margin profile which had improved for Westlife Foodworld as average unit volume crossed the Rs 60 million+ mark, has taken a hit in last two years due to difficult operating environment. As volume recover for the industry, operating leverage will rebound for the company.

This, along with cost savings and consistent but modest gross margin improvement (led by stable input costs and mix+pricing), will support Ebitda margin expansion (building ~420 bps expansion over FY25-27E).

Ebitda thus expected to grow at 27.8% CAGR over FY25-27E.

At current market price, the stock is trading at ~34x/23x FY26E/FY27E Ebitda (post IND-AS 116). In a normal environment, aggressive store expansion, market share gain focus, improving return ratios and a formal dividend policy in place, should command better valuation than earlier years, we believe.

We continue to remain cautious about full demand recovery especially in urban markets but are also confident that Westlife will rebound to earlier margin profile (even with increased royalty rate) once industry volume recovers.

We assign a target multiple of ~25 times on our March’27E Ebitda and arrive at an unchanged target price of Rs 855.

Due to recent stock movement, there is limited upside on 1-year forward basis and hence we downgrade the stock a notch to Add.

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