The stock, which has surged 28 per cent from its March lows, currently trades at 29 times its FY22 estimated enterprise value-to-Ebitda, about 24 per cent higher than the 23 times of Jubilant FoodWorks. The latter earns around two-third of its revenue from delivery/takeaways, indicating relatively faster recovery for the pizza maker. Vishal Punmiya, analyst, Nirmal Bang, downgraded the Westlife stock to ‘accumulate’ from ‘buy’ after the run-up.
Analysts believe that consumers would be reluctant to go to crowded public places for some time even after the economy is completely opened. Around 74 per cent of Westlife’s stores are located in metros such as Mumbai, Pune, Ahmedabad, etc, which are hit by the pandemic. This, along with social distancing norms, will delay the recovery in the dine-in business.
Top line pressure and weak operating leverage, in turn, would take a toll on Westlife’s operating profit margin and overall earnings. In Q1, 75.4 per cent year-on-year drop in revenue to Rs 94 crore, led by 54 per cent decline in same-store sales (excluding stores that were shut) resulted in an Ebitda loss of Rs 57.7 crore and loss before tax of Rs 76.8 crore. This was despite cost efficiency measures, including rent re-negotiation. The firm had reported PBT of Rs 8.5 crore in the June 2019 quarter.