Highway stores help Westlife Foodworld outperform peers in uncertain demand environment

The company anticipates higher returns in Tier-2 cities and has already finalised real estate deals for the stores set to open in FY24.

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The management of Westlife Foodworld in a recent interaction with a domestic broking firm said that high density of highway stores and value proposition offered by the company have helped them beat peers in an uncertain demand environment. In a conference hosted by Nirmal Bang, the company’s top brass said that despite the resurgence of the unorganised food services market post-COVID, the strong brand presence of McDonald’s and unique value offering have helped the company mitigate the impact more effectively than its competitors.

Westlife Foodworld, the owner and operator of McDonald’s restaurants in West and South India, made its debut on the National Stock Exchange on June 5.

Westlife was previously just “permitted to trade,” but it is now listed on both the NSE and the BSE, giving it greater access to more shareholders. At 1 pm, the stock was quoting at Rs 837 on the NSE.

Westlife’s expansion efforts in South India and Tier-2 cities have also yielded positive results. The introduction of its Chicken offering in these regions has led to a narrowing of the Average Unit Volume (AUV) gap between the West and South markets, the management added.

Ambitious plans

Although the company currently has no plans for price hikes, a slight increase in prices within the range of 3-5 percent may be implemented in FY24 if necessary. Additionally, WFL expects significant growth in its beverage segment, particularly with the McCafe brand.

All these measures have helped Westlife Foodworld grow its operating margins from 13 percent in FY22 to 16 percent in FY23, while Jubilant Foodworks, Devyani International, and Restaurant Brands Asia have reported 100-300 basis points decline in margins due to rising flour and dairy costs.

With ambitious plans to reach approximately 600 stores by 2027, WFL aims to expand its network further. The company anticipates higher returns in Tier-2 cities and has already finalised real estate deals for the stores set to open in FY24.

On back of this, Nirmal Bang has assigned a multiple of 33x to the March’25 EBITDA, resulting in a target price target price of Rs 985 for Westlife Foodworld. “The company has consistently delivered strong financial performance, making it a top pick in the Consumer Discretionary space,” said the broking firm which has a Buy rating on the stock.

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