ICICI Securities: Westlife Development - It’s All About Cash Conservation
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ICICI Securities Report
Q1 performance showed Westlife Development Ltd.’s strong execution capabilities.
It managed to reduce average monthly fixed cost by 30-35% (renegotiating rents, reimagining supply chain, variable staff costs, etc.), thereby limiting cash losses at Rs 550 million loss in Q1 on a balance sheet with Rs 1.6 billion cash as of March 2020.
Although the commentary on recovery in convenience formats (delivery, drive-through, takeaway and on-the-go, together contribute more than 50% of revenues) sounds promising, we expect pressure from weakness in core dine-in business and high operating leverage structure.
Long-term benefits from expansion of food service market remain intact, but medium-term weakness limits ability for store expansion which is integral to current fair value.
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