Emkay Global Financial's research report on Westlife Development
WLDL’s Q2 EBITDA was 5-6% higher than estimates, largely led by better revenues. WLDL reported a 3Y revenue CAGR of 13%, led by a best-in-class revenue/store CAGR of 9.3% vs. estimate of 7.5%. Inflation management was better than expected, as GM improved by 80bps vs. expectation of a 40bps decline. Unlike peers, WLDL was confident of maintaining its GM, led by 2% price hikes in Oct-22, better revenue mix, and supply-chain efficiencies. Factoring in a stronger SSG performance and allied margin benefit, we have increased our FY24/25E EBITDA estimates by 8-9%. WLDL is targeting accelerated expansion (200 store additions over the next 3-4 years), led by stronger growth in non-metros and traction in meals (gourmet burgers/fried chicken). However, we remain conservative with our expectation of 35-40 stores/year. Better margins also led to a ~400bps increase in our medium-term RoIC assumption to 40%, effecting a higher multiple at 29x Dec-24 EBITDA vs. 27x earlier.
Outlook
Maintain Buy with a revised TP of Rs910 (Rs720 earlier), led by earnings/multiple upgrade and 3M rollover .
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