Q3FY24 Review: Westlife Foodworld: External issues hamper performance

2 Feb 2024 , 01:43 PM

Westlife Foodworld reported a weak Q3FY24 performance, impacted by external events which resulted in same store sales (SSS) decline of 9% during the quarter (3% decline adjusted for external events). Management has taken measures to address the external issues and is hopeful of a recovery in FY25. Analysts of IIFL Capital Services downgrade their adj Ebitda estimates by 5-12% to factor in the Q3 performance and a more gradual recovery going ahead. Maintain BUY with a TP of ₹950. 

Below estimates: 

Westlife Foodworld reported Q3FY24 results which were below analysts of IIFL Capital Services estimates. Sales declined by 2% (7% below IIFLe) while pre IND AS Ebitda declined by 19% (17% below IIFLe). Same store sales declined by 9% during the quarter with outside events such as Chennai floods and certain geo-political events significantly impacting performance of some specific stores – these stores witnessed 10-50% decline in daily sales from mid October onwards, leading to contrasting SSS growth trends. 

Hopeful of recovery in FY25: 

Demand weakness in the cohort of stores which are not impacted majorly by the external events seems to have bottomed out. The company has initiated various measures to highlight that McDonald’s India is a truly Indian company with a diverse employee base encompassing different communities. With these measures, management is hopeful of overall recovery from start of FY25 onwards and soon, getting back to its aspiration of high single digit SSS growth 

Adj Ebitda downgrade of 12%/7%/5%: 

Adjusted for the stores impacted by the external events, management estimates a decline of 3% in same store sales, which is not very different vs. other QSR players. Analysts of IIFL Capital Services factor in the Q3 performance and a gradual recovery in SSS trends, resulting in a 12%/7%/5% downgrade in their adj Ebitda estimates for FY24/25/26. Management is confident of meeting its store addition guidance of 40-45 stores in FY24 (23 YTD) and 45-50 store additions in FY25. Maintain BUY rating with a target price of ₹950.