Westlife Foodworld Q3 Results Review - Weak Delivery; Demand Challenges Persist: Motilal Oswal

Motilal Oswal Report

Westlife Foodworld Ltd. reported a weak performance in Q3 FY24 as growth metrics (same store sales growth, average daily sales) were under pressure owing to subdued demand. SSS declined 9% YoY as both dine-in and delivery businesses were hit. The floods in South India also added to the woes. Of the 9% SSS decline, 6% was due to external factors. Net revenue was down 2% YoY despite 11% YoY store growth.

Led by subdued growth, restaurant operating margins (restaurant operating margins; post-Ind AS) contacted 130 basis points YoY and 40 bp QoQ to 22.5%. Profit before tax margin was at 4%, down 400 bp YoY and 100bp QoQ. Profit before tax saw a sharp 52% YoY decline during the quarter.

The quick service restaurant industry has been witnessing weakness in growth metrics, leading to a sharp deceleration in the margin profile (typical trend in QSR during the downcycle).

We do not foresee any near-term respite in demand. We model a 6% PBT margin in FY25E versus 6.6% in FY23 and 4.3% in FY24E.

We reiterate our 'Neutral' rating on the stock.

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