Travel Food Services Ltd - A long runway for growth | Q1FY27 Company Update

Travel Food Services (TFS) Ltd reported a strong Q1FY27 performance, with revenue and earnings ahead of our estimates, supported by better-than-expected like-for-like growth, healthy net contract gains and continued mobilisation of new outlets across key airports. Importantly, the company delivered this performance despite subdued passenger traffic and weakness in international travel amid Middle East disruptions, underscoring the resilience of its business model and effectiveness of premiumisation, menu innovation and revenue optimisation initiatives. While near-term margins remain impacted by upfront manpower and pre-operating costs associated with the recent commissioning cycle, we expect operating leverage to improve as these outlets mature. Going ahead, growth visibility remains strong, supported by the ramp-up of nearly 90 recently commissioned units, 50+ outlets under development across Delhi, Cochin, Navi Mumbai, Noida and other airports, and continued scaling of premium Travel QSR, lounges and passenger services. We maintain our BUY rating with a target price of Rs 1,830.

Travel Food Services ltd. Stock Price Chart

Premiumization and New Unit Ramp-up Drive Strong Growth:

TFS reported consolidated revenue growth of 20.6% YoY to Rs 4,522mn (MNCL Est of Rs 4,207mn).  Revenue growth was driven by a combination of LFL sales growth of 4.2% YoY and strong net contract gains of 20.2% YoY driven by the mobilisation of new units at Delhi Airport (Terminal 1 & Terminal 2), Cochin Airport (Domestic Terminal 1) and Noida Airport. Despite softer traffic growth amid the Middle East conflict, revenue growth remained healthy, aided by premiumization, strategic pricing and revenue optimization initiatives. System-wide sales stood at Rs 8,437mn during the quarter, reflecting strong growth of 18.0% YoY.

OPM contraction:

Gross margin for the quarter expanded by 240bps YoY to 85.7% (MNCL Est. 83.2%), driven by strong sales growth, improved mix led by value-led combos, and procurement efficiencies. EBITDA margin, however, contracted by 300bps YoY to 35.8% (MNCL Est. 37.2%), primarily due to a 540bps YoY increase in other expenses, led by Rs 223mn of lounge aggregation costs being classified under other expenses, along with higher pre-operating costs associated with the ramp-up of new units across Noida, Cochin and Delhi. Consequently, EBITDA grew 11% YoY to Rs 1,619mn (MNCL Est. Rs 1,565mn), aided by better gross profit flow-through. PAT for the quarter stood at Rs 1,267mn, up 38.1% YoY (MNCL Est. Rs 1,163mn), led by higher other income (+470bps) and lower interest cost.

Outlook:

We remain optimistic on TFS, supported by continued outlet and lounge additions, expansion into high-traffic airports, and sustained premiumisation trends. During the quarter, the company added 23 outlets, taking its network to 541 outlets across 21 airports, with a portfolio of 153 brands. The expansion in network and brand partnerships reflects strong execution and provides multiple avenues for sustained growth. Operations at Cochin, Delhi and Noida airports continue to scale up well, while the expected commencement of operations at Bhogapuram provides additional growth visibility. Further, a healthy pipeline of 50 outlets and upcoming airport opportunities, including Pune, offer meaningful long-term expansion potential. TFS is also evaluating international lounge opportunities across Malaysia, Hong Kong, Indonesia and the Middle East, while exploring adjacencies such as expressway-based wayside amenities. Despite near-term volatility from geopolitical and traffic-related factors, we believe TFS remains well-positioned, supported by disciplined execution, operational efficiencies, strong cost controls and a scalable business model.

Valuation & Key risks:

We remain positive on TFS, supported by its strong positioning within India’s aviation-led consumption opportunity, high entry barriers, expanding airport footprint and healthy return profile. We expect the company to deliver a Revenue/EBITDA/PAT CAGR of 13.2%/12.3%/13.9% over FY26–29E. Following the stronger-than-expected revenue performance, we have raised our revenue estimates by 2.8%/1.8% for FY27E/FY28E, while marginally tweaking our earnings estimates. We believe TFS remains well placed to benefit from rising air passenger traffic, recovery in international traffic, continued premiumisation and ongoing expansion across airports and lounges. We value the stock at 40x Q1FY29E P/E, implying ~2.4x PEG, and raise our target price to Rs 1,830 (Rs 1,670), while maintaining our BUY rating. Key risks: inability to secure new concession agreements, non-renewal of existing airport contracts and a slowdown in consumer spending.

Company website: https://www.travelfoodservices.com/

*CMP is as per report published date

Click to download the full Travel Food Services Ltd Q1FY27 Company Update

Analyst:

• Rahul Dani - Research Analyst, Institutional Equities (NISM-201500034725)
• Aachal Pal - Research Associate, Institutional Equities (NISM-202300215737)

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FAQs on Travel Food Services Ltd Q1FY27 Company Update

These FAQs summarize key insights from MNCL’s institutional equity research on Travel Food Services, highlighting performance trends, growth drivers and key risks.

What is the target price for Travel Food Services?

The supplied research sets a target price of ₹1,830 per share, raised from ₹1,670. This is a research-based valuation estimate and is not a guaranteed return.

What is the rating on Travel Food Services?

The supplied research maintains a BUY rating on Travel Food Services, citing its airport expansion, premiumisation, new outlet pipeline and long-term aviation consumption opportunity.

How did Travel Food Services perform in Q1FY27?

Consolidated revenue increased 20.6% year-on-year to ₹4,522 million. EBITDA rose 11% to ₹1,619 million, while PAT increased 38.1% to ₹1,267 million.

What drove Travel Food Services' Q1FY27 growth?

Growth was supported by 4.2% like-for-like sales growth, 20.2% net contract gains, new airport units, premiumisation, strategic pricing and revenue optimisation initiatives.

How large is Travel Food Services' airport network?

During Q1FY27, TFS added 23 outlets, taking its network to 541 outlets across 21 airports, with a portfolio of 153 brands, according to the supplied company update.

What are the key growth drivers for Travel Food Services?

Key growth drivers include new airport outlets and lounges, premiumisation, higher passenger traffic, recovery in international travel, revenue optimisation and expansion into high-traffic airports.

What is the outlook for TFS's new airport outlets?

The company has nearly 90 recently commissioned units ramping up and more than 50 outlets under development across locations including Delhi, Cochin, Navi Mumbai and Noida.

Why did Travel Food Services' EBITDA margin decline in Q1FY27?

EBITDA margin declined 300 basis points year-on-year to 35.8%, mainly due to lounge aggregation costs and higher pre-operating expenses linked to the ramp-up of new units.

What is the long-term earnings outlook for Travel Food Services?

The supplied research expects Revenue, EBITDA and PAT CAGR of 13.2%, 12.3% and 13.9%, respectively, over FY26–29E, supported by airport expansion, premiumisation and operating leverage.

What are the key risks for Travel Food Services?

Key risks identified in the supplied research include inability to secure new concession agreements, non-renewal of existing airport contracts and a slowdown in consumer spending.

Should investors consider Travel Food Services shares?

The supplied research maintains a BUY rating. This represents the research provider's view and is not personalised investment advice or a guarantee of future performance. Investors should conduct independent due diligence and consult a SEBI-registered investment adviser where appropriate.

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