Westlife Development
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
WLDL IN
156
65.7 / 0.9
535 / 271
3/2/-10
118
14 May 2021
4QFY21 Results Update | Sector: Retail
CMP: INR422
TP: INR400 (-5%)
Second COVID wave dampens near-term outlook
Neutral
Financials & Valuations (INR b)
Y/E March
2021 2022E
Sales
9.9
12.3
Sales Gr. (%)
-36.3
25.0
EBITDA
0.5
1.6
Margins (%)
4.8
13.0
Adj. PAT
-1.0
-0.3
Adj. EPS (INR)
-6.7
-1.8
EPS Gr. (%)
P/L
-
BV/Sh.(INR)
30.9
29.1
Ratios
RoE (%)
-19.6
-6.0
RoCE (%)
-5.1
5.7
Valuation
P/E (x)
N/M
N/M
P/BV (x)
13.6
14.5
EV/EBITDA (x)
144.2
42.1
Shareholding pattern (%)
As On
Mar-21 Dec-20
Promoter
58.0
59.1
DII
20.8
20.4
FII
10.8
9.6
Others
10.4
10.9
FII Includes depository receipts
2023E
18.5
50.0
3.0
16.0
0.6
4.2
L/P
33.3
13.3
20.5
101.3
12.7
22.7
Weaker-than-expected performance
Westlife Development (WLDL) delivered in-line SSSG, but lower-than-
expected sales growth, with just one new store addition in 4QFY21 and
only five in FY21. Furthermore, the dine-in channel (45% of sales in
4QFY21) was still below normal levels. However, strong performance from
the convenience channel is a positive.
Gross margin (GM) expansion through volume recovery, channel
optimization, and supply chain initiatives is encouraging. The recovery in
McCafé would further support the GM. EBITDA margins were below
expectations, with a one-time employee bonus and salary reversals putting
pressure. Nevertheless, the company’s efforts on fixed cost reduction
should aid margins going forward.
While we like the structural outlook for WLDL, the near-term challenges
due to the second COVID wave would lead to an overhang on the stock.
The higher salience of the dine-in channel would delay normalcy.
Valuations of 22.7x FY23E EV/EBITDA are at a ~9% discount to JUBI and do
not leave scope for an upside. Maintain
Neutral.
In 4QFY21, WLDL’s net sales grew 6.3% YoY to INR3.6b (est. INR3.8b).
SSSG was reported at 10.5% YoY (in line with estimates).
WLDL opened one new McDonald’s store in 4QFY21.
Gross margins were up 90bp YoY to 66.5%.
Restaurant operating margins (ROM) were up 560bp YoY to 16.4%.
EBITDA grew 28.8% YoY to INR468m (est. INR536m).
The EBITDA margin expanded 230bp YoY to 13.1% (est. 14.2%).
Adj. PAT loss stood at INR65m (est. profit of INR55m).
FY21 sales/EBITDA declined 36.3%/78.1% YoY. Adj. PAT loss for FY21 stood
at INR1b vis-à-vis profit of INR93m in FY20.
A 90% recovery was seen in dine-ins and an accelerated performance from
the convenience channel (which grew 42% YoY). WLDL did not see any
drop in convenience channel sales even as dine-in sales recovered in
4QFY21.
The convenience/dine-in channel accounted for 55%/45% share in the
quarter. In-store sales were only 70% of pre-COVID sales (Jan’20).
WLDL lowered its fixed costs significantly in FY21. Its new cost structure is
now more resilient to volatility.
While the ongoing second COVID wave is affecting the retail business
across the sector, the higher salience of WLDL’s dine-in channel would
delay recovery. We cut our sales estimates for FY22/FY23E by 20%/12.5%
and EBITDA estimates by 25.9%/10%.
Although we like the structural opportunity for WLDL, near-term
challenges would prove an overhang. Valuations of 22.7x FY23 are at a ~9%
discount to JUBI and do not leave scope for an upside. Valuing the stock at
21x FY23 EV/EBITDA (~15% discount to JUBI), we achieve TP of INR400.
Maintain
Neutral.
Mar-20
59.1
16.1
12.7
12.2
Highlights from management commentary
Valuation and view
Krishnan Sambamoorthy – Research Analyst
(Krishnan.Sambamoorthy@MotilalOswal.com)
Research Analyst: Dhairya Dhruv
(Dhairya.Dhruv@MotilalOswal.com)/Kaiwan
Jal Olia
(kaiwan.o@motilaloswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.