On Monday, Kotak Securities adjusted its outlook on Westlife Foodworld Ltd (WLDL:IN), reducing the price target to INR700.00 from INR700.00 while keeping a Reduce (3) rating on the stock. The revision comes after an assessment of the company's recent performance metrics.
Westlife Foodworld's recent operational figures showed a mixed performance with a revenue per store growth of 0.5% and same-store sales (SSS) declining by 6.5%, matching the moderated expectations set by the analysts. Despite these results, the company's pre-Ind AS EBITDA margin dropped to 7.2%, marking a seven-year low, with the exception of the Covid period.
The company's operating performance has been hampered by a downturn in the dine-in channel, which saw a 2% decline, and persistent challenges in certain stores due to geopolitical issues. In response, Westlife is shifting towards a value-centric strategy, introducing new entry-level products, and emphasizing cost savings to regain its growth trajectory and meet its Vision 2027 targets.
Kotak Securities notes that while same-store sales are expected to show optical improvements in the third quarter as the impact of geopolitical issues is anticipated to wane, the underlying demand remains soft. This is projected to continue affecting the company's EBITDA. Consequently, the firm has reduced its pre-Ind AS EBITDA estimates for fiscal years 2025 to 2027 by 11-18%, leading to the revised fair value of INR700.00.
The firm's stance on Westlife Foodworld remains cautious, as indicated by the retained Reduce rating, signaling a conservative outlook on the stock's potential performance in the near term.
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