Hold Westlife Development; target of Rs 300: ICICI Securities

ICICI Securities research report on Westlife Development

Growth capital augmentation appears a necessity and hence high probability, in our view. Westlife is focusing on mitigating the impact of weak demand. We like the initiatives to drive revenue (focus on delivery, drive-through, takeaway and onthe-go – together contribute >50% of revenues) and cost savings (renegotiating rents, closing unprofitable stores, reimagining supply chain = lower fixed costs). Long-term benefits from expansion of food-service market remains intact. That said, combination of medium-term pressure on growth and high operating leverage business structure are headwinds.

Outlook

Although transitory, this could lower the ability for medium-term store expansion which is integral to current fair value. Retain HOLD.

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