Motilal Oswal has given Neutral recommendation for Westlife Development with a target price of Rs. 490 in its research report issued on May 19, 2022
Motilal Oswal’s research report on Westlife Development
All operating parameters for WLDL – SSSG, sales, gross margin, and EBITDA – were in line. Unusually higher other income and lower than expected interest costs led to the PAT beat. The management said that dine-in is back to pre-COVID levels and yet the convenience platform is doing much better than pre-COVID levels. The opportunity for QSRs in India is attractive and has enhanced significantly post-COVID, as elaborated in our thematic note in Dec’21. While WLDL’s prospects are improving, earnings growth over the next fourto-five years can be weaker than its peers, given: a) the scheduled increase in the royalty rate to 8% in FY27, and b) limited room to improve gross margin, with 80% of its stores already having McCafé outlets. We maintain our Neutral rating.
We maintain our Neutral rating, given its fair valuations, scheduled increase in royalty rates to 2x of current levels, and limited incremental gross margin levers. Our TP of 23x pre-Ind AS FY24E EBITDA leads to a TP of INR490 per share.