Emkay Global Financial has given Buy recommendation for Westlife Development with a target price of Rs. 650 in its research report issued on May 19, 2022
Emkay Global Financial’s report on Westlife Development
Q4 is the second consecutive quarter where WLDL’s operating performance is 30-50% higher than street estimates and ~20% higher than our estimates. The strong performance was led by a stronger recovery in dine-in sales and better-than-expected margin gains. Despite challenges in Q4, dine-in sales recovered fully and convenience sales doubled, leading to 35% growth vs. Q4FY20. Growth was driven by filling portfolio gaps in the meals category with gourmet burgers/fried chicken, as well as omni-channel capabilities. EBITDA margins were up 200bps despite a 150bps gross margin decline due to the RM spike. WLDL expects to beat inflation with small price hikes, supply-chain efficiencies and a better mix. It added 10 new stores in Q4 and expects to add 200+ in the next 3-4 years.
We largely maintain our FY24E EBITDA. WLDL has the potential to deliver a relatively better performance upon unlocking, and consistent H2 performance should boost street confidence. Maintain Buy with a revised TP of Rs650 (based on 28x Jun’24E EBITDA vs. 32x earlier). Multiple cut is led by a 25bps increase in WACC and 3M rollover.