Goldman Sachs has upgraded Westlife Foodworld Ltd (WLDL:IN) from Neutral to Buy, with a new price target of INR1,075, up from INR820. The firm predicts a strong recovery for the company in the second half of fiscal year 2025, along with a long-term growth trajectory that outperforms its competitors. This upgrade is based on the potential impact of a new product launch and enhanced value offerings that are expected to drive a rebound in same-store sales growth (SSSG) in the latter half of FY25.
The analyst from Goldman Sachs emphasized that Westlife Foodworld has a favorable base in the second half of FY25 due to certain one-off issues, which sets it up for a successful recovery. The company's successful introduction of new categories in its existing restaurants and its ability to cater to multiple day-parts were identified as key factors contributing to its strong growth trajectory within the quick-service restaurant (QSR) sector.
Goldman Sachs has increased its EBITDA (pre-Ind AS 116) estimates for fiscal years 2026 and 2027 by 1.5% and 3.6%, respectively, based on the expected sales recovery driven by SSSG. The firm forecasts a sales compound annual growth rate (CAGR) of 13% and an EBITDA (pre-Ind AS 116) CAGR of 22% for Westlife Foodworld from FY24 through FY27.
The valuation of Westlife Foodworld has been set at a target enterprise value to EBITDA (EV/EBITDA) multiple of 38 times, up from the previous multiple of 32 times. This valuation represents a roughly 25% discount to the average of the firm's India consumer discretionary coverage, maintaining the same sector discount as before. In comparison, Jubilant's India business is currently trading at an implied EV/EBITDA of 44 times FY26 estimates.
The analyst concluded that as Westlife Foodworld's operational performance improves, its valuation should start to align more closely with the broader sector. With the revised price target of INR1,075 and the upgrade to a Buy rating, Goldman Sachs projects approximately 20% upside for the stock.
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Analysis:
In simple terms, Goldman Sachs has upgraded its rating for Westlife Foodworld Ltd, predicting a strong recovery and long-term growth potential for the company. This upgrade is based on the expected impact of new product launches and enhanced value offerings that are projected to boost sales growth. The firm's revised estimates show an increase in EBITDA and sales growth rates for the company, with a target price set at INR1,075. This could result in a 20% increase in the stock price, presenting a good opportunity for investors looking to capitalize on the company's growth prospects.