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Shares of Westlife Foodworld Ltd., which operates McDonald’s chain of restaurants in the western and southern regions of India, gained on Friday after the company announced that it plans on adding 250-300 stores in the next 5 years.

Under its vision 2027 plan, Westlife Foodworld aims to work with renewed aggression to scale the total number of stores to 580-630 within the next five years. It currently has 337 stores.

The management also said that work on the next 200 stores has already commenced and that the long-term potential for total stores stands at 1,000.

The company is also planning to at least double the pace of store addition to 40-55 stores over this five-year period from the historical rate of 23-24 new stores per annum.

Westlife also envisions tripling its annual sales under its vision 2027 plans. It expects to achieve a sales figure between Rs 4,000 crore to Rs 4,500 crore from the Rs 1,576 crore figure it achieved in financial year 2022. The management expects revenue growth to be backed by high single-digit same store sales growth (SSSG).

On the operating margin front, it looks to achieve 18-20 percent EBITDA margin compared to the current 12.8 percent.

The management further said that it is looking to have a 15-18 percent revenue contribution from McCafe and that it is now targeting 100 percent McCafe stores penetration from the current 81 percent.

As there is no material change in numbers, brokerage firm Motilal Oswal has maintained its neutral rating on the stock given its fair valuations, scheduled increase in royalty rates to 2x from current levels and limited gross margin levers. It has a price target of Rs 805.

Nirmal Bang believes that Westlife's potential of brand extensions is yet to be fully unlocked. Westlife is the brokerage's top pick within the consumer discretionary space. It has upgraded its rating on the stock to buy from accumulate with a revised price target of Rs 830 from the earlier Rs 815.

Shares of Westlife Foodworld are trading 2.4 percent higher at Rs 736.

First Published:Dec 2, 2022 10:43 AM IST