SPECIALITY - Speciality Restaurants Limited Share Price

During the Q3 FY26 earnings call for Speciality Restaurants Limited, management expressed a highly positive outlook for the company. Mr. Anjan Chatterjee, Chairman and Managing Director, highlighted the significant revenue achievements, noting that the company witnessed its highest revenue in this quarter. Despite some impact from a new government gratuity provision, they remain optimistic about future growth.

CFO Rajesh Kumar Mohta provided key financial figures, stating that for the quarter, the company's standalone revenue grew by 9%, with an EBITDA margin improving to 12.75% from 11.85% year-over-year. The EBITDA post-IndAS stood at 24.89%, up from 23.43% the previous year, while gross margins improved to 70.8% from 69.3%. Same-store sales growth (SSG) was stable, maintaining a similar figure from the previous year.

Looking ahead, management anticipates opening 8 to 10 new restaurants in FY27, with a capital expenditure expected to be funded by cash generated from operations, making it a less capex-intensive growth strategy. The expansion in QSR (Quick Service Restaurant) brands will include 3 to 5 locations.

Management also addressed the potential impact of job losses in the IT sector, particularly in Bangalore, stating that their restaurant locations are strategically chosen to mitigate this risk. They noted that their presence in corporate and residential areas would buffer against revenue losses.

In terms of delivery growth, the company reported that their delivery contribution to revenue has surged to 24%, driven by changes in consumer behavior post-pandemic, even though their primary focus remains on dine-in experiences.

Finally, for international operations, they are expanding in Dubai and exploring further growth in regions like Saudi Arabia without substantial capital investment, leveraging their master franchise model.

Major Questions and Answers from the Earnings Call Transcript

Question 1: "What kind of restaurant addition are we looking at in FY '27 and what kind of a capex should that lead to?" Answer: "We expect to open around 8 to 10 new restaurants in FY '27, continuing our historical pattern. This includes 3 to 5 restaurants in the QSR category, which is on a growth trajectory for us. The capital expenditure will predominantly be supported by cash generated from our business, as this is not a capex-heavy segment."

Question 2: "How large is Pune and Bangalore from a revenue perspective, given the current IT job losses and their impact?" Answer: "Our presence in Bangalore isn't as significant as in Kolkata or Mumbai, and we believe the revenue impact won't be severe due to our locations in corporate and residential areas that drive traffic. We've not seen adverse effects yet, and our brands like Mainland China appeal to a diverse audience beyond just the IT crowd."

Question 3: "Can you elaborate on how same-store sales growth and overall demand are presently?" Answer: "Same-store sales growth remains steady. Our expansion strategy focuses on optimizing restaurant spaces and targeting high-traffic areas. Recent openings, like Asia Kitchen in Chandigarh, have shown encouraging early performance. While demand in metro areas is strong, we approach non-metro cities cautiously, adjusting our offerings to local preferences."

Question 4: "What is the current trend regarding delivery services through platforms like Zomato and Swiggy?" Answer: "Delivery has risen from around 5-6% to 24% of our revenue since the pandemic, due to shifting consumer habits. We're not overly dependent on delivery but maintain a balanced approach. We're enhancing our average order value through strategic partnerships and CRM initiatives to encourage dine-in visits, offering special promotions."

Question 5: "Can you provide an update on international operations, particularly in London and Dubai, and their profitability?" Answer: "In Dubai, we have a master franchise agreement ensuring minimum revenue share from outlets. Current operations are promising, with ongoing plans for expansion in the UAE and entries into Saudi Arabia. There's no capex required from our end. Our focus remains on menu optimization and operational support to ensure profitability."