Buy Westlife Foodworld Ltd For the Target Rs.650 by Axis Securities Ltd
Resilience Amid Demand Softness; Maintain BUY
Est. Vs. Actual for Q2FY26: Revenue- MISS; EBITDA – MISS; PAT – BEAT
Changes in Estimates post Q2FY26
FY26E/FY27E: Revenue: -3%/-7%; EBITDA: -14%/-30%; PAT: -37%/-44%
Recommendation Rationale
* Sustains Growth Momentum Despite a Challenging Out-of-Home Consumption Backdrop: Westlife Foodworld demonstrated operational resilience in Q2FY26 despite a subdued out-of-home consumption environment. Revenue increased 4% YoY to Rs 642 Cr, supported by disciplined cost controls, menu innovation, and omnichannel execution. Samestore sales declined 2.8% YoY amid a broader 4–6% industry contraction in out-of-home food consumption, especially across the Western fast-food category. On-premise sales grew 5% YoY, while off-premise channels remained steady. Early signs of recovery were visible in October, and management expects a gradual improvement in consumption trends driven by moderating inflation and supportive policy actions. With a strong operating model and a wellestablished brand portfolio, the company remains positioned to capture emerging opportunities and advance toward its Vision 2027 target of adding 580–630 new stores by CY27.
* Operational Efficiency Drives Margin Expansion: Westlife Foodworld delivered a resilient performance despite commodity price and demand volatility, with gross margins expanding by 276 bps YoY to 72%, supported by improved supply chain efficiencies. Restaurant operating margin expanded by 60 bps YoY, while operating EBITDA margin contracted 184 bps YoY to 10.5% due to operating deleverage, partially offset by continued cost optimization measures. Management reaffirmed confidence in sustaining gross margins above 70% by 2027.
Sector Outlook: Cautious
Company Outlook & Guidance: We maintain our BUY recommendation on the stock as the company’s long-term growth levers remain intact.
Current Valuation: 27xSep’27EV/EBITDA (Earlier: 27xMar’27EV/EBITDA )
Current TP: Rs 650/share (Earlier: TP: Rs 880/share).
Recommendation: With an 11% upside potential from the CMP, we maintain our BUY rating on the stock.
Financial Performance
Westlife Foodworld reported revenue growth of ~4% YoY in Q2FY26, while SSSG declined 2.8% YoY amid weak discretionary demand trends. Gross margin expanded by 276 bps YoY to 72%, supported by meaningful gains in supply chain efficiencies. EBITDA declined 11.7% YoY, with margins contracting 184 bps YoY to 10.5% due to operating deleverage. Adj PAT stood at Rs 17.7 Cr, aided by an exceptional gain of Rs 53 Cr.
Outlook
The strategic initiatives under Vision 2027 to drive growth remain firmly in place. These include: 1) scaling fast-growing categories, 2) leveraging an omnichannel approach, 3) raising store opening guidance to 580–630 stores by CY27, and 4) improving operating margins to 18–20% by Dec'27. With a demonstrated track record of delivering 17% revenue and 51% EBITDA growth CAGR from FY16 to FY20, driven by a focus on volume recovery, the company is well-positioned to execute this roadmap. The long-term outlook for the QSR industry remains favourable, supported by ongoing formalisation, increasing disposable income, and an expanding dining-out culture. These structural tailwinds are expected to underpin sustained growth. Accordingly, we estimate Revenue/EBITDA to grow at 13%/9% CAGR over FY25–28E.
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SEBI Registration number is INZ000161633
