Speciality Restaurants LtdQ4 FY18Leisure Services

Speciality Restaurants Ltd

Q4 FY18 Earnings Call Analysis

Management growth scorecard

Revenue

Category 4

Margin

Category 3

Fundraise

N/A

Order

N/A

Capex

Yes

1 of 3 growth signals are positive — mixed outlook.

Full analysis

Revenue guidance

Category 4

→The company is cautiously approaching expansion, focusing on profitable locations.
→Plans to open only five to six new restaurants in upcoming periods, emphasizing quality over quantity.
→Incremental growth is shifting from Mainland China to newer brands like Hoppipola and Sigree.
→Hoppipola is undergoing revamps every 2-3 years to adjust menu composition towards a more balanced food and liquor revenue mix (50:50) to drive growth.
→Conversions of existing restaurants (like Mainland China to Asia Kitchen) continue, with capex between Rs. 75 lakhs to 1 crore per store, aiming to optimize assets.
→Raw material costs are expected to stabilize or improve, potentially benefiting margins and revenues.
→The focus is largely on metros like Mumbai and Kolkata for new openings.
→Franchise expansion limited mainly to tier 2 cities, while the company prefers owning stores in metro areas for better EBITDA margins.

Margin guidance

Category 3

→The company is working hard to deliver better results over time, indicating optimism for future earnings growth. (Page 17)
→Expansion and revamp strategies involve cautious opening of profitable locations, typically five to six restaurants, focusing on markets like Mumbai and Kolkata. (Page 16)
→Focus is on improving cost-to-revenue ratio due to moderation in raw material prices and potential benefits from GST through full input credit availability, which could enhance profitability. (Pages 13-14)
→They are converting existing assets like Mainland China restaurants into more liquor-food balanced formats (e.g., Hoppipola), aiming to increase revenue per square foot and improve margins. (Pages 15-16)
→Franchise expansion is limited, with better EBITDA margins expected from company-owned stores. (Page 12)
→Corporate overhead remains around 7-7.5% of revenues, manageable for future profitability. (Page 9)
→Overall cautious but positive outlook with focus on cost controls, brand revamps, and selective expansions to support earnings growth. (Pages 6, 17)

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Fundraise plans

→There is no explicit mention of any current or planned fundraising through debt or equity in the provided transcript.
→The management emphasizes cautious expansion with only two new restaurants opening by March 2017.
→Focus is on profitable locations and improving operational efficiency rather than aggressive capital raising.
→They are working on renegotiation of rentals and improving cost structures to enhance cash flows.
→No indication of immediate plans to raise funds; the company appears to be managing growth with existing resources.
→Any future fundraising plans are likely subject to business performance and market conditions, but no details were shared during this call.

Order book

The transcript from Specialty Restaurants Limited Q3 FY17 conference call does not mention any details about current, expected orderbook, or pending orders. The discussion primarily revolves around: - Restaurant performance, same store sales growth, brand strategy, and conversions. - New restaurant openings and cautious expansion plans. - Cost control measures, rent negotiations, and impact of GST. - Operational metrics between company-owned and franchisee stores. - Revamp and refurbishment costs for brands like Hoppipola. - Financial results, including revenues, expenses, and net loss for the quarter. No direct reference or data related to orderbook or pending orders is provided in the available text.

Capex plans

Yes

→Specialty Restaurants is cautiously planning new restaurant openings, targeting only profitable locations.
→Two new restaurants were scheduled to open by March 31, 2017, with ongoing conversion work on four existing units.
→Conversions (e.g., Mainland China to Asia Kitchen) cost between ₹75 lakhs to ₹1 crore per store, significantly lower than Greenfield openings (~₹3 crores).
→Hoppipola brand investments focus on utilizing existing assets to improve revenue per square foot by adding food emphasis (targeting a 50:50 food-to-liquor revenue mix).
→Renovations or revamps for brands like Hoppipola occur every 2-3 years, costing under ₹50 lakhs usually for interior updates; menu refreshes are ongoing and low cost.
→The company favors company-owned stores in metro areas due to better EBITDA margins, with franchisees focused mostly in tier 2 cities.
→No aggressive expansion; emphasis on sweating existing assets and cautious, profitable growth.

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