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Shares of Westlife Foodworld (WFL), the master franchisee of McDonald’s restaurants for West and South India, moved higher by 10 per cent to Rs 815.25, hitting a fresh record high on the BSE in Tuesday’s intra-day trade, in an otherwise weak market.
In the past two days, the stock has rallied 12 per cent after the company said it is looking for an almost three-fold jump in sales, between Rs 4,000 crore and Rs 4,500 crore in the next five years by 2027, mainly on the back of network expansion, and omni channel approach.
It surpassed its previous high of Rs 811.15, touched on November 9. In comparison, the S&P BSE Sensex was down 0.50 per cent at 62,540 at 11:07 AM. In the past six months, the stock has zoomed nearly 80 per cent as compared to 12 per cent rise in the benchmark index.
Analysts at Prabhudas Lillaher believe WFL is well placed to capitalise on growth opportunity in the quick service restaurant (QSR) space given strong Menu innovations like Gourmet Burgers, Fried chicken, McCafe, coupled with strong store format with EOTF stores, rising salience of McDelivery and Digital sales, more focus on South with 60 per cent of incremental stores given higher AUV & chicken sales and accelerated store expansion plans in coming years.
“WFL guidance of 5 per cent Royalty till FY26 and gradual increase thereafter is positive. We believe WFL has high probability to surpass Vision 2027, given strong growth momentum post covid. We estimate Sales CAGR of 27.3 per cent over FY22- 25 with an EPS of Rs 8.3/11.5/15 in FY23/24/25,” analysts at the brokerage said. It maintains a ‘Buy’ rating on the stock with a target price of Rs 847 per share and expect more calibrated returns incremental post sharp run up in past 6 months.
“Going ahead (FY23-28), WFL expects annual addition of 45-55 stores (10-12 per cent CAGR), which suggests a significant pick-up vs. the past trends. Increased confidence is driven by healthy improvement in profitability of South India stores (fried chicken/wings launch) and stronger traction in Tier-2 markets, which will see 50-60 per cent of new store additions vs. 30-40 per cent historically,” said those at Emkay Global Financial Services.
However, revenue guidance of Rs 4,000-4,500 crore for FY28 (12-14 per cent CAGR) implies a low Rev/Store CAGR of 0 per cent-3 per cent. While SSG expectations remain healthy at high single digits, lower Rev/Store expectations were attributed to higher new store additions, which generally see a lower throughput initially vs. mature stores, the brokerage firm added.
“We align our estimates towards the higher end of WFL’s guided Rev/EBITDA bands for FY28, which leads to a 5-8 per cent cut to our FY23-25E EBITDA estimates. Given its best-in-class execution in the recent past and further ramp-up potential of chicken/meals/café/dessert categories, we see scope of upward revision of revenue guidance. We maintain our Buy rating with a revised TP of Rs 840 (vs. Rs 910) on an unchanged multiple of 29x Dec-24 EBITDA,” analysts said.
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