Prabhudas Lilladher Maintains Buy Rating, Targets Westlife Foodworld at Rs 552

Westlife Foodworld Maintains Healthy Growth Momentum

Prabhudas Lilladher's research report highlights Westlife Foodworld's (WFL) strong growth trajectory, driven by a healthy recovery in the south market and growth in the west. The company's Same Store Sales Growth (SSG) for the latest quarter stood at 1.5%, lower than the industry average of 2%. However, this was largely aided by the growth in the west and recovery in the south market, with everyday value meals contributing to increased footfalls.

The company's Adjusted Gross Margin (processing cost adjusted) expanded by approximately 60 basis points (bps) quarter-on-quarter (QoQ). Prabhudas Lilladher expects this trend to continue, with a predicted expansion of approximately 80bps over the fiscal years (FY) 2026-2028, driven by supply-side efficiencies. Additionally, the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin improved by 50bps year-on-year (YoY) in the fourth quarter, primarily due to lower overheads. The research firm believes that operating leverage and cost control will aid a 350bps expansion in pre-Ind AS margin over FY2026-FY2028.

West Market Performance

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The near-term outlook for WFL remains healthy, with green shoots visible in both the south and west markets. The company is targeting mid-single digit SSSG and Rs30 billion in sales over the near-term period. Furthermore, WFL remains focused on long-term growth drivers, including product innovation across burgers, chicken, and coffee-led combos, as well as the introduction of subscription programs in McCafé. The company plans to expand its store count, with guidance of 580-630 stores by calendar year (CY) 2027, representing a net addition of approximately 50 stores in FY2027.

Valuation and Recommendation

WFL trades at 18.7x FY2028 Pre-Ind AS EV/EBITDA, representing a fall of approximately 38% from its peak. Given the tepid demand over the last couple of years, the research firm believes that the risk-reward is favorable in case the recovery in demand sustains. Therefore, Prabhudas Lilladher maintains an Accumulate rating with a DCF-based target price of Rs552, unchanged.

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