Scripscan:Westlife Development Ltd(Hardcastle Restaurants)
Cmp:472(94rs after stock split)
Target:2000(400rs after stock split)
"Warren Buffett Quote":Buy companies with strong histories of profitability and with a dominant business franchise.
Story:McDonald's operations in western and southern India has got consolidated.Hardcastle Restaurants Pvt Ltd (HRPL), the privately-held franchisee of McDonald's Restaurants is getting merged with its parent Westlife Development Ltd. Hardcastle Restaurants Private Limited (HRPL), the Master Franchisee for McDonald’s west & south operations has been the pioneer in introducing global QSR practices to India and has established a leadership position in the rapidly growing QSR industry in the country.Hardcastle Restaurants Pvt. Ltd. (HRPL) leads the restaurant footprint in India with over 148 restaurants across the states of Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra and Tamil Nadu.Westlife has been moving up nonstop over the last few months after its announcement of reverse merger with Hardcastle.There's only jubilant food to play with in the similar category but that's available at a marketcap of 8500crs.Westlife at present price of 470 bucks attracts 1/10th of jubilant foods marketcap,i.e,870crs.QSR market is pegged USD 15 bn and is expected to grow by 15-18% pa over 2013-2020.This represents a huge opportunity for a company like hardcastle which with mcdonalds has been in the market for over 15 years.The company plans to increase the store count to 250 in next 3 years.Westlife reported sales of Rs 547.4 crore, including Hardcastle, in 2011-12, which was more than half of Jubilant's sales at Rs 1,017 crore.Thus if jubilant trades at 8500crs mcap,Westlife or hardcastle gets a fair value at 4200-4500crs or 2100-2300rs per share.With zero external debts and decent cash reserves,the conviction increases multifold.Also if hardcastle can extend its reach to Mcdonanld's other brand such as Mccafe, the story would only get stronger.The company has no further plans of diluting equity which as seen previously has always worked for the interest of minority shareholders,enriching the value in most cases.Promoters owns 75% stake in the company which will only help it to sustain even much higher valuation as people are starved of interesting businesses.The company may well grow 25-30% CAGR for the coming 10 years.Its a cash cow business which will always drive large handsome cash flows.Its hard to get the shares as it suffers from low liquidity but if you can, be rest assured of minting huge money in the coming few months and years.