Travel Food Services Ltd - Premiumization-led growth - Company Update

Travel Food Services (TFS) Ltd reported a better-than-anticipated Q4FY26 performance, with revenue and earnings ahead of our estimates, largely due to better than estimated like-for-like growth, strong net contract gains and continued mobilization of new units across key airports. Despite softer passenger traffic amid the onset of the Middle East conflict, system-wide sales remained robust, highlighting the resilience of its commercial model and benefits of premiumization, menu engineering and revenue optimization initiatives. Margins expanded meaningfully, aided by operating leverage and disciplined execution. Going ahead, we expect growth momentum to remain healthy, supported by ramp-up of recently added outlets, a strong pipeline across Delhi, Cochin, Navi Mumbai and the upcoming Noida airport, along with sustained premiumization across travel QSR and lounges. Further, scaling up the EATS (Eliteassist Technology and Services Pvt Ltd) platform and international lounge opportunities should provide additional growth levers over the medium term. We maintain our BUY rating with a TP of Rs 1,670.

Premiumization and New Unit Ramp-up Drive Strong Growth:

TFS reported consolidated revenue growth of 25.7% YoY to Rs 4,670mn (MNCL Est of Rs 3,786mn).  Revenue growth was driven by a combination of healthy LFL sales growth of 9.4% YoY and strong net contract gains of 17.3% YoY driven by the mobilisation of new units at Delhi Airport (Terminal 1 & Terminal 2) and Cochin Airport (Domestic Terminal 1). Despite softer traffic growth amid the Middle East conflict, revenue growth remained healthy, aided by premiumization and revenue optimization initiatives. System-wide sales stood at Rs 8,954mn during the quarter, reflecting strong growth of 27.7% YoY.

Strong Margin Expansion Driven by Operating Leverage:

Gross margin for the quarter expanded by 430bps YoY to 87.3% (MNCL Est.: 83.2%), driven by strong sales growth, improved mix led by value-led combos, and procurement efficiencies. EBITDA margin expanded by 370bps YoY to 40.4% (MNCL Est of 36.2%), supported by gross margin expansion and operating leverage benefits. Consequently, EBITDA grew 38.3% YoY (+2.8% QoQ) to Rs 1,863mn, (MNCL Est of Rs 1,370mn), aided by lower manpower costs and better gross profit flow-through. PAT for the quarter stood at Rs 1,208 mn, up 17.8% YoY (MNCL Est of Rs 985mn).

Outlook:

We remain optimistic on TFS, driven by continued outlet and lounge additions, expansion into high-traffic airports, and sustained premiumisation trends, which are expected to remain key long-term growth drivers. During the year, the company added 76 outlets and 2 lounges, taking its network to 550+ outlets across 20 airports, alongside a portfolio of 145 brands. The steady expansion in network presence and brand partnerships reflect strong execution capabilities and highlight multiple avenues for future growth. Operations at Cochin and Delhi Airport continue to scale up well, while Navi Mumbai Airport is witnessing the rollout of new concepts ahead of the expected traffic ramp-up. Growth visibility remains strong, supported by the expected commencement of operations at Noida Airport in the coming months, alongside a healthy pipeline of 50+ outlets and the long-term opportunity at Bhogapuram Airport. In addition, the company is actively evaluating international lounge opportunities across markets such as Malaysia, Hong Kong, Indonesia, and the Middle East, while also exploring emerging adjacencies including expressway-based wayside amenities. While the near-term environment remains dynamic amid geopolitical and traffic-related volatility, TFS remains well-positioned, supported by disciplined execution, operational efficiencies, strong cost controls, and a scalable business model.

Valuation, view & 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 superior return profile, with ROE expected to reach ~25% by FY28E. We expect the company to post a revenue/EBITDA/PAT CAGR of 13%/12%/13% over FY26-28E. The company is also well placed to benefit from continued premiumisation trends, rising air passenger traffic, and ongoing network expansion across airports and lounges. We assign a target multiple of 40x FY28E P/E (implying ~2.2x PEG), arriving at a target price of Rs.1,670, maintain a BUY rating. Key risks – Inability to secure new concession agreements, non-renewal of existing airport contracts, 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 Q4FY26 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 Q4FY26 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.

1. Why is Travel Food Services positive on growth outlook?

The company is benefiting from premiumization, airport expansion, strong lounge demand and increasing passenger spending across major airports.

2. What drove TFS Q4FY26 performance?

Revenue growth was led by strong like-for-like sales, new outlet additions, premium menu mix and operational efficiencies.

3. What are the key future growth drivers for TFS?

Growth drivers include new airport contracts, lounge expansion, premium food concepts and scaling of the EATS platform.

4. What risks should investors monitor?

Key risks include slowdown in air traffic, failure to secure new concessions and softer discretionary consumer spending.

5. What is the target price for Travel Food Services?

The brokerage has maintained a BUY rating with a target price of Rs 1,670.

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