Westlife Foodworld soars 10% to hit a new high on strong business outlook

Shares of Westlife Foodworld soared 10 per cent to hit a record high of Rs 851.35 in Thursday’s intra-day trade on strong business outlook. The stock of restaurants company surpassed its previous high of Rs 815.25, touched on December 6, 2022.

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Westlife Foodworld focuses on setting up and operating Quick Service Restaurants (QSR) in India through its subsidiary Hardcastle Restaurants Pvt. Ltd. (HRPL). The company operates a chain of McDonald’s restaurants in the western and southern parts of India, having a master franchisee relationship with McDonald’s Corporation USA, through the latter’s subsidiary.
 
In January-March (Q4FY23) quarter, Westlife Foodworld reported all-time high sales of Rs 556 crore, up 22 per cent year-on-year (YoY) with a strong double-digit SSSG (same-store sales growth) of 14 per cent YoY. The strong sales were driven by a double-digit growth in dine-in customers, enabling the on-premise business to grow by 38 per cent YoY.

The company said its own delivery channel, the McDelivery platform, saw a robust rise in user base, as digital sales improved to around 62 per cent, led by SOKs (Self-Ordering Kiosks).

That apart, the company reported a 30.3 per cent YoY increase in consolidated net profit to Rs 20.30 crore during the quarter.

Despite weak macros, the management is targeting 40-45 store additions (vs. 35 in FY23) and has guided for a strong 8 per cent SSG in FY24. The company believes the format provides potential to add/scale new brand extensions, which should help it deliver a sturdy SSG in a weak environment as well.

Moreoever, the management anticipates a high single-digit SSSG and the addition of 40-45 new restaurants in FY24.

The easing commodity pressures and the company's focus on growing average unit volume are the key positive factors, believe analysts at Motilal Oswal Financial Services. This could be partly offset by an increase in royalty, they added as they shared 'neutral' rating on the stock.

Analysts at Prabhudas Lilladher, meanwhile, remain positive on the structural story for Westlife given guidance of 580-630 stores by CY27 (40/45 in FY24).

"The excitement created with limited time launches (Big Mac, Piri Piri McSpicy range), increased traction on fried chicken & new launches like chicken wings (additional Rs10mn of AUV/store), strong start in Tier2/3, with growth being 1.5x than metros and likelihood of gradual increase in royalty beyond 5 per cent after FY26 are key positive triggers," the brokerage firm added.