PL First Cut - Westlife Foodworld 2QFY24

PL First Cut – Westlife Foodworld 2QFY24 – Amnish Aggarwal – Head of Research, Prabhudas Lilladher Pvt Ltd

Westlife Foodworld 2QFY24 – Demand slowdown and store openings impact margins

(CMP: Rs893|Hold)

Financial Performance

> Revenues grew by 7.4% YoY to Rs6.1bn (PLe: Rs6.4bn)

> SSSG at 1% V/S 7% in 1Q

> Gross margins expanded by 464bps YoY to 70.1% (Ple: 70.5%)

> EBITDA grew by 2.4% YoY to Rs982mn (PLe: Rs1092mn); Margins contracted by 78bps YoY to 16% (PLe:17.0%)

> Adjusted PAT declined by 29.1% YoY to Rs224mn (PLe: Rs325mn)

Other Updates

> Targets 40-45 new restaurants in FY24

> Digital sales improved to ~67% with 14% growth in MAU.

> The company now has 237 Experience of Future stores (~74% of restaurants) & 327 McCafés (~88% of restaurants)

> Both on-premise/off-premise businesses grew by 7%

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2Q24 results show significant impact on slowdown in consumer demand. Although Westlife has been relatively resilient in the past few quarters, the slowdown has started showing the impact finally. In addition higher opex on acceleration in store openings has impacted margins. We believe 40-45 store addition target will continue to impact margins in 2H24 as well. Structural story however remains on track. We have an HOLD rating on the stock.

Stock trades at 79.1x FY25 EPS