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We remain optimistic on WFL's near-term outlook driven by 1) healthy demand outlook with FY27 sales target of Rs30bn, 2) continued recovery in South supported by positive SSSG, 3) healthy sequential improvement in footfalls across regions, and 4) likely peaking of input inflation, supporting operating leverage. WFL guided for mid-single-digit SSSG in the near term with 100–150bps YoY EBITDA margin expansion annually led by better product mix and cost engineering. We expect GM to expand ~80bps over FY26–FY28 on supply-side efficiencies and easing input inflation. We expect operating leverage and cost control to drive ~320bps expansion in pre-Ind AS EBITDA margin over FY26–FY28.

WFL remains focused on long-term growth drivers, including 1) product innovation across burgers, chicken and coffee-led combos, including McSaver meals and subscription program in McCafé 2) store expansion with guidance of 580–630 stores by CY27 (~ net 60 additions in FY27). WFL trades at 14.1x FY28 Pre-Ind AS EV/EBITDA. WFL offers favorable risk reward on hopes of sustained recovery in demand. We rollover to June28 and Maintain Accumulate with DCF-based target price of Rs543.

Financial Highlights

* Revenues grew by 11.9% YoY to Rs7.4bn. SSG came in at 4.3% (Ple: 3.5%)

* Gross margins contracted by 405bps YoY to 67.6% (Ple: 67.8%). EBITDA grew by 8.9% YoY to Rs929mn (PLe:Rs1037mn); Margins contracted by 34bps YoY to 12.6% (PLe:14.2%)

* Adjusted PAT declined by 52.2% YoY to Rs6mn (PLe:Rs97mn). 5 New restaurants were added in 1Q taking the total count to 482 stores.

Concall Takeaways:

• SSSG came at 4.3% in 1Q led by double digit guest count growth across West and South market

• South reported positive SSSG with momentum continuing in Q2

• May-Jun posted mid-single-digit SSSG, with Jul likely to sustain similar momentum.

• Company aims to reach Rs30bn in sales in FY27 led by improving demand condition

• WFL to focus on acquiring customers first and subsequently improving ticket size through product mix.

• Lower Q1 store additions were due to temporary equipment availability issues (electric fryer inventory linked to LPG transition)

• Inflation across food, packaging, fuel, utilities and labour remained elevated in Q1 with impact across the P&L exceeding 200 bps in 1Q

• WFL aims to improve EBITDA margins by ~100–150 bps annually led by combination of improving product mix & cost engineering

• Q1 represents the peak of inflationary pressure, with costs expected to moderate going forward.

• pricing actions will be taken carefully to avoid impacting consumer traffic.

• Digital sales contribution stood at 74%, growing by 150 bps YoY, led by higher engagement across the McDelivery platform 

• Like for like GM declined QoQ led by higher fuel, food & packaging costs.

• Inflationary pressures likely to ease with improving geopolitical conditions; GM guided to sustain above 67% over the near-to-medium term.

• WFL is aims to open 60+ restaurants in FY27 with remains on track to take total count to 580-630 by Dec’2027

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