Westlife Foodworld Limited, the operator of McDonald’s in West and South India, saw its shares jump by 6% on September 27 following an upgrade from Goldman Sachs. The stock surged to Rs. 941 on the NSE, backed by increased trading volumes and a positive market outlook. This upgrade makes it an appealing option for those looking to invest in stocks, particularly in the quick service restaurant (QSR) sector.
Why Goldman Sachs upgraded Westlife Foodworld?
Goldman Sachs upgraded Westlife to a 'buy' rating, with a target price of Rs. 1,075, indicating a potential 22% upside from its previous close. This upgrade was driven by the recent launch of McDonald’s McCrispy platform, which includes premium items like the McCrispy Chicken Burger and Crispy Veggie Burger. These high-margin products are expected to boost profitability in the long term, making Westlife an attractive choice for those who invest in stocks.
Strong trading volumes indicate investor confidence
A significant increase in trading volumes accompanied the stock's rally. Over 15 lakh shares were traded on the BSE and NSE combined, well above the one-month average of one lakh shares. This surge in volume reflects growing investor confidence, particularly among those looking to invest in stocks with strong growth potential.
Positive outlook for same-store sales growth
Goldman Sachs also expects Westlife to recover its same-store sales growth (SSSG) in the second half of FY25, driven by a softer base and new product launches. The brokerage forecasts single-digit SSSG from FY26 onwards, signalling a stable future for the company. This makes Westlife a promising option for long-term investors looking to invest in stocks within the food and beverage sector.
Challenges faced by Westlife Foodworld
Despite the recent stock rally, Westlife has faced operational challenges. For the quarter ended June 30, 2024, the company’s consolidated profit after tax dropped by 89% to Rs. 3.25 crore, and same-store sales fell by 6.7% year-on-year. Rising expenses, particularly in royalty costs, have also strained the company’s bottom line. Investors should consider these factors when deciding to invest in stocks like Westlife.
Invest safely
Westlife Foodworld’s recent stock performance, bolstered by Goldman Sachs’ upgrade, signals strong potential for growth in the coming quarters. While the company has faced some financial headwinds, its new product launches and positive SSSG outlook make it an appealing choice for those seeking to invest in stocks in India’s expanding QSR market.
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