Emkay Global Financial has given Buy recommendation for Westlife Development with a target price of Rs. 600 in its research report issued on Mar 17, 2021
Emkay Global Financial’s report on Westlife Development
Our bullish investment thesis on Westlife Development (WLDL) rests on three pillars: 1) Superior unit economics – about 30-40% higher revenue per store – relative to peers; supported by value pricing and strategies aimed at increasing in-store visits and offering complementing menus. Recent initiatives on digital could provide a further fillip. 2) Comparison with Domino’s highlights a 3x store roll-out potential – offering a long visibility into penetration-led growth. We expect mid-teen revenue growth for several years with an upside risk. 3) Our relative analysis of a peer at a similar scale throws a strong case for a 500bps upside in EBDITA margins. Higher unit economics should lead to industry-leading ROEs as high upfront overheads get more corralled with scale. The pandemic has already reset the cost curve lower, commensurate with a 20% lower revenue.
We are initiating coverage with a Buy rating and a Jun’22E TP of Rs600, based on 32x Jun-23E EV/EBITDA (backed by our long-term DCF analysis).