MOSL: WESTLIFE DEVELOPMENT (Neutral)-Aggression on store additions a welcome change
WESTLIFE DEVELOPMENT: Aggression on store additions a welcome change
(WLDL IN, Mkt Cap USD1.1b, CMP INR513, TP INR540, 5% Upside, Neutral)
- WLDL delivered better than expected SSSG and sales growth, led by continued strong momentum in the convenience platform, while dine-in was affected by COVID-related restrictions. As these restrictions are being lifted, WLDL would see much better sales performance going forward. This is because the convenience channel continues to remain elevated, despite a recovery in dine-in, as per recent trends. This bodes well for both sales per store and margin performance.
- While gross margin was higher than expected, EBITDA margin was slightly below our expectation. This is not a concern as a recovery in sales would bring back margin in the quarters ahead.
- The management sees an enhanced opportunity for organized players and forecasted a potential of 1,000 McDonald’s stores (up from 800 previously). This is in line with our analysis, as stated in our . It has guided at aggressive store additions of 30-40 annually from FY23 onwards, up from 20-25 in recent years. This is a welcome move, especially as competitor Burger King is on an aggressive store addition spree.
- With an enhanced market opportunity and an aggressive outlook, we raise our target multiple for WLDL to 25x Sep’23E (from 23x previously). While its peers are trading at substantially higher multiples, WLDL's 27.8x FY23E EV/EBITDA multiple is not cheap in light of the scheduled royalty rate increase to 8% in FY27. We maintain our Neutral
Westlife Development Limited is engaged in letting out of property and trading in goods. The Company's segments include Trading and Leasing. The Trading segment is engaged in trading of steel, textile and other materials. The Leasing segment provides office premises on operating lease basis. The Company focuses on putting up and operating quick service restaurants (QSR) in India through its subsidiary, Hardcastle Restaurants Pvt. Ltd. (HRPL). Its restaurant categories include freestanding, food court, in-store and mall stores. The Company operates a chain of McDonald's restaurants in west and south India. The Company, through its subsidiary HRPL, operates McDonald's through approximately 240 restaurants across over 30 cities. Its service formats and brand extensions consist of restaurants, Breakfast, McDelivery and kiosks at various transit points. The Company has operations in Telangana, Gujarat, Karnataka, Maharashtra, Tamil Nadu, Kerala and parts of Madhya Pradesh.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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