ICICI Securities has maintained a 'BUY' rating on Travel Food Services, setting a target price of Rs 1,600. While the company reported strong revenue and profit growth in Q1 FY27, investors are monitoring how expansion costs are impacting profit margins and the reasons behind slow sales growth in existing outlets.
ICICI Securities has maintained its 'BUY' recommendation for Travel Food Services (TFS), setting a target price of Rs 1,600 per share. The brokerage's outlook comes following the company's Q1 FY27 financial results, which showed a mix of strong expansion-led growth and temporary pressure on profitability.
In the quarter ended June 30, 2026, Travel Food Services reported a 20.6% year-on-year increase in consolidated revenue, reaching Rs 452.2 crore. Net profit also saw a significant rise, growing 35.6% to Rs 128.8 crore. These figures reflect the company's aggressive strategy to increase its market share, highlighted by the addition of 87 Quick Service Restaurant (QSR) outlets over the last twelve months.
However, this rapid expansion has brought challenges for the company's profit margins. The EBITDA margin, which measures operational profitability, contracted by 308 basis points to 35.8% during the quarter. This decline is largely attributed to the upfront costs required to set up and start operations at new locations, known as mobilization costs. In simple terms, the company is spending money now to prepare for higher sales in the future, which is creating a short-term hit to margins.
Another point that investors are observing is the 'like-for-like' (LFL) sales growth, which measures the performance of existing outlets without including new ones. This growth was muted at 0.8% in the recent quarter. The company management pointed to specific external factors for this performance, including temporary airport terminal shifts and the impact of geopolitical tensions in the Middle East, which affected overall travel sentiment and passenger traffic patterns.
Despite these short-term headwinds, the company maintains a strong financial foundation. TFS operates with a debt-free balance sheet and reported a cash position of approximately Rs 969.8 crore as of June 30, 2026. This liquidity provides the firm with the necessary resources to continue its expansion plans without relying on external borrowing.
For investors, the key monitorable going forward will be the pace at which the newly opened outlets begin to generate revenue and improve their operating efficiency. The company’s ability to turn these new units into profit-generating assets, combined with a recovery in passenger traffic, will likely determine if it can offset the recent margin compression and sustain its growth trajectory.