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We retain ADD on Westlife and TP of Rs550 (24x Jun-28E EBITDA), on strong SSG recovery (4.3% in 1Q; ~5% in May-/Jun-26) and acceleration in network expansion (targeting 60 gross stores in FY27 vs 48 in FY26). Topline growth improved to 12% in 1Q and was ~3% ahead of estimates, helped by continued strong performance in West India and SSG turnaround in South India. The current strategy hovering around everyday value (Rs99 meal), vernacular marketing, and focused on-ground execution has helped reduce the growth differential across both regions. With continued thrust on EDV/marketing and focused reduction in volume-value gap, Westlife expects improving momentum to sustain through FY27. While cost inflations and higher marketing led to flat EBITDA margin in 1Q, Westlife expects operating leverage, cost engineering, and pricing to help drive 100-150bps annual margin gain over FY26-29. Valuation at 22x pre-IndAS FY28E EBITDA is comfortable, and improving growth trends provide scope for a valuation re-rating.

SSG momentum improves; confident of 100-150bps annual margin gain

Westlife posted strong topline growth of ~12% yoy in 1Q (~3% beat to our estimate), led by 4.3% SSG (11-quarter high) and rest via network addition. SSG momentum continued in 1Q after turning positive in 4QFY26, led by double-digit growth in guest count on the back of the EDV platform (Rs99 meals) and brand marketing initiatives. Encouragingly, the SSG trend has sustained in Jul-26, and Westlife remains confident of delivering mid-single digit SSG for FY27. Guest count grew across all months of the quarter, and across both West and South markets. Among channels, both on-/off-premise sales grew ~12% yoy. The McDelivery platform continues to see strong growth trends. Store additions were muted in 1Q (4 net new stores), though the management remains confident of opening >60 stores in FY27. Westlife reiterated its guidance of 580-630 store-count by CY27 (FY28). Restaurant EBITDA margin declined by ~130bps yoy due to inflationary pressures more than offsetting operating leverage. Westlife expects these headwinds to ease and aspires for ~100-150bps margin expansion each in FY27/FY28. Overall EBITDA margin was flat yoy, at ~13% (in line with our estimate), helped by decline in HO cost by ~110bps. Westlife’s pre-IndAS EBITDA margin saw a modest decline of ~20bps to 7.5%. Reported EBITDA at Rs946mn was a tad higher than our estimate

South market seeing healthy traction, led by improved on-ground execution

South region delivered positive SSSG in 1Q, reflecting the early success of execution initiatives undertaken over the past few quarters. The company addressed gaps in its value proposition by introducing the right product offerings, and is now focused on strengthening on-ground execution across key cities. Improved performance was driven by continued marketing of its EDV (Everyday Value) platform, which aided a meaningful increase in guest traffic, alongside the successful launch of the "Let's Family at McDonald's" campaign that improved brand relatability. Westlife has a strong presence in the region, with >60 stores in Bengaluru, >35 in Hyderabad, >20 in Chennai, and a healthy footprint across cities such as Vizag and Coimbatore.

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