Speciality Restaurants (NSE:SPECIALITY) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Speciality Restaurants Limited Q2 FY 'twenty seven Conference Call hosted by ICSI Securities Limited. I now hand the conference over to Mr. Anikit Kamli from ICICIAL Securities Limited. Thank you, and over to you, sir. Thank you, Rituja. Hi. On behalf of ICICIAL Securities, I welcome you all to the Q2 FY 'twenty seven earnings call I now hand over the call to management for opening remarks.

1:00 Thank you, and over to you, sir. Thank you, Mr. Anikit, for the introduction. Good evening, ladies and gentlemen. Myself, Rajesh Kumar Mohota, CFO of SPECIALITY RESEAURANTS Limited, welcome you all to the Q2 FY twenty twenty seven earnings call of SPECIALITY RESEAURANTS Limited. We are pleased with the progress made during the year quarter. The standalone business delivered healthy year on year growth with revenue from operations increasing by 18.24 to INR129.78 crores compared with INR109.76 crores in Q2 FY twenty twenty six. Operational EBITDA grew by 39.44% to INR10.242 crores against INR7.47 crores in the corresponding quarter last year with the EBITDA margin improving to 8.03% from 6.81.

2:08 Profit after tax increased by 45.75% to INR6.94 crores compared with INR4.76 crores in Q2 FY twenty twenty six. An encouraging aspect of our performance during this quarter has been the growth in our existing restaurants portfolio. What we have witnessed during this particular quarter is a same store sales growth, which had been 8.1% in the quarter two, which was 11.32% in quarter one and is 9.8% in H1 of FY twenty twenty seven. The delivery mix has also changed during the quarter.

2:59 This Q2 FY twenty twenty seven had 32% delivery and 68% dine in, which was 27.4% on delivery and 72.6% Q2 FY twenty twenty six of last year. As of 09/30/2026, our network comprised 125 outlets, including 118 company owned and operated outlets and seven franchise owned company operated outlets, including a restaurant under our subsidiary. During the first half, we continued to expand through brands such as Walters, Sweet Bingle Gong, Asia Kitchen and Siciliana, while we have taken some renovations and brand repositioning initiatives as well.

3:52 Our focus for next half would be strengthening our existing restaurant network, developing our diversified brand portfolio with profitable expansion and execution during H2 of FY twenty twenty seven. We have a number of openings planned across Mumbai, Delhi, Pune, Bangalore, Kolkata and Dubai during the second half. Alongside new openings, we are undertaking renovations and brand conversion initiative at select existing locations. We have submitted our investors presentation to stock exchanges, which would be available to ourselves wherein we have all the details of the planned expansions and renovation.

4:42 Overall, our priorities will be to consolidate the progress achieved during the first half and the quarters with strengthening our network, brands and expansions in a profitable manner. I would like to thank our shareholders and investors for their continued trust and support. I now thank I would look forward for interactions and taking your questions. Thank you. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. If you wish to remove yourself from the question queue, you may press star and two.

5:28 Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Manish Bihani from Dakshum Capital. Hi, sir. Good afternoon. So, sir, my question was if you could please just share the company level EBITDA and EBITDA margin on a pre INDS basis, basically excluding the impact of lease accounting for the last two years, if possible, of this year also, sir.

6:24 Thank you very much. Our company level EBITDA for the quarter two of this financial is 7.90%, which was 6.52 last year. And sir, next one more question. If you could just help me understand the unit economics of major brands like Mainland China and especially in those like the average daily sales per outlet or store level contribution margin, things like this, If you could just throw some light on that. Yes. If I may, on let's say, on an Asia kitchen basis, we have a throughput almost like INR 60 to 75 lakhs of rupees in a month depending upon the size and location.

7:17 This has a gross margins of almost like 76 percent. Then after we have staff cost, which ranges between 22% with rentals being at 18%. We have operating expenses, which are to the tune of 11% with an EBITDA of almost like 22%. Then we have depreciation of 4%, which leaves us at 18% at restaurant level basis. Okay, sir. And any average daily sales, sir, for outlet? Number You that's compare the brand and size and locations. But as I indicated to, the range is between 60 lakhs to 75 lakhs, which converts into 2 lakhs to 2.25 lakhs to $2.2.5 lakhs per day.

8:08 Okay, sir. Thank you. Thank you so much, sir. Thank you. Participants to ask your question, please press star and 1. Next question is from the line of Vikram Kotak from Ace Landstone. Please go ahead. Yeah. Hi. Is I audible? Yes. Loud and clear. Yeah. Hi. Hi, Rajeshwari. Hi, Abhi. Just a question on the... You know, how is the season panning out and your leaner second quarter normally. How do you see the season in the coming quarter? And what are the plans in terms of improving your sales for the other micro strategies you're adopting to the sales and you know, delivery volume? Just wanna understand how how the next quarter looks like.

9:03 Mister Amit? Thanks for the question. So the next quarter, seasonally, has always been the best quarter for any hospitality or restaurant business. Right. And similar to that, for us as well, it's very optimistic about this current quarter. And we do have two to three new restaurants that will be also launching in this quarter, which would add up to our fees for revenue. And seasonal planning, marketing plans, all of those are in place to make sure that we maximize the season for fall times of the business. Okay. Okay. Okay. And also one small... Yeah.

9:51 Yeah. Sorry. Carry on, Amit. Sorry. Amit. Sorry. Sorry. So we have two new dorm openings Right. Which is our premium Asian dining, one in Delhi, one in Pune. And alongside that, we have three more Walters, Burdo openings as well, which is our QSR brand. Apart from that, we also do have plans to open another Sicilian outlet, casual dining, Italian. All of these would be coming in in this quarter. So Gong, right now, we are in Bandra. Right? And now we're opening two more. So it'll be three Gong. Right? So it would actually be four Gongs because Gong already existed before Bandra in Pune. Okay. So it'd be Bandra being the second one, Delhi being the third, fourth one being... Another one in Pune, which is at Korygo Park. Okay. And Siciliana will be how many after this opening?

10:41 It'll be a total of around six. Okay. Okay. And and the and the delivery, I've seen a big jump in delivery mix. Is it a seasonal, or you think so this is a trend going forward? This is a complete trend because we've seen a complete shift of diner habits Okay. To more of a hybrid model where diner is something that people feel is achievable maybe probably once a week or twice in a month. But delivery has been a boon for us, which is also letting our brands reach the consumer at least four times a week. Okay. So you mean to say a customer who is coming to do... Coming to your restaurant once a month, maybe also ordering twice or time, whatever that number may be. The same customer will be ordering online also. Right?

11:32 He's apparently the same customer. Okay. Okay. So delivery helps us link the consumer more times. Right. Right. Right. Right. So any any plan to expand the consumer because then it's a big opportunity for you because the same consumer is earlier coming once to the fine dining, and then now he's today ordering maybe a four, three, four, five times more than earlier. So per customer revenue is really going up. So do you see opportunity to penetrate more customers, and what are your plans to... How do you outreach make your reach further, you know, expanded in the in the current scenario? And how do you really kind of penetrate more yourself? One, of course, you always open a more restaurant, but what are the other opportunities you see, which is not opening the physical outlet or maybe through the... Whatever the media advertising, social media. What what are what are the plans there? Sure.

12:23 So the best plan that we... Has worked magically for us is kitchen within kitchen concepts. Where, for example, if we have an Asian kitchen, we also do deliver our other Asian brands from the very same kitchen without having any extra CapEx or staff cost or any other cost added to it. We can deliver the various brands. Like, there's Mainland China, there's Asia Kitchen, and Hakao coming out of the same units. So we have three different point of points of sale with the same given cost. So that becomes very beneficial. And, of course, with the kind of aggregate of boom that we've seen in our country, with the growth of the aggregators and the growth actually is powered by us, restaurateurs. So having more visibility, having more offers, having more deals, and also having tactical campaigns running on those aggregator platforms has been one of the most beneficial for us to grow our delivery business.

13:22 Okay. Got it. Got it. So when you see a week sale two years from now or three years from now, where do you see the delivery percentage will be at from current level? So currently, it's at around 29% of our business, but we feel like this would be around 20 to 35. Why? Because we are expanding dine in hand in hand. So we understand that dine in is something that we are known for, and delivery is something that is a secondary revenue stream for us. And I think that that kind of a merger would continue to grow. Got it. Got it. So you you think that 20 to 25% next to three years, you can go to delivery. So it's a steady growth in delivery as well and then dining also.

14:09 Okay. Absolutely. Right. And last question on the inflation side, the raw material cost increasing, we are seeing the new jump in the, you know, most, you know, food items. How how do you do you pass on? Do you take a price hike? Or what... What's the way to kind of protect the margins? So we haven't really taken a very big jump in price hike. What we have managed to do is because of economies of scale having such a large operations, our vendors have been very supportive. Our team has worked very hard to renegotiate terms and also have buying power by giving future timelines of new units opening up. So that's been a great advantage for a business like us because we have multi chain, multi brand, multi cuisine operations.

14:58 So that's something that we would say is a core advantage to our business. Okay. So you're not taking a big price hike, but you're able to manage within the current set of things. Yeah. Okay. Got it. Yeah. Absolutely. Okay. Superb. Superb. And all the best for the future. Thank you so much. Thank you. Thank you. Participants who wishes to ask a question, please press star and 1. Next question is from the line of, an individual investor. Please go ahead. Hi. This is. So my primary question was on the target expansion to 200 outlets by FY twenty thirty. So I just wanted to get a big thoughts on the portfolio brand level breakdown on how these incremental outlets would be added and the geographical breakdown if you have a plan on plan on it yet?

15:57 Sure. Thank you for the question, sir. So we, as a company, have taken our strategy of focused brand expansions, which I may reiterate, which will be oriental. And in oriental, we have our mom and grand name in China, Asia Kitchen right after, which is our mall format. And we have Gong, which is our premium dining Asian format, and we have Aka, which is our pure delivery. Our second category for expansion would be Siciliana, which is our Italian cafe... All day cafe format. And our third one would be our QSR division, which has sweet Bengal, which is sweets, traditional Bengali sweets, and the second one being Vultrils in the burger and gourmet category. This continues to be our strategy to expand until the years to come, and we see great potential in growing these in various segments.

16:51 Currently, we are very happy with the West Bengal region, Mumbai, Bangalore and Pune. But now in this quarter itself, we'll be entering Delhi again with Gong, and all our brands will be now focused towards taking more advantage to markets like Delhi, Hyderabad, and Bangalore. That would be our next gen expansion road map. And would this incremental from the current 207 outlets to 200 outlets also include your cloud kitchen, so is this only physical outlet? This would be mainly physical outlets, but since we also do take advantage of kitchen within kitchen operations, we would be having these at every location that we place ourselves. But, yes, it would not be in count with the 200 outlets.

17:49 Got it. And just a final question from my end. What is the kind of incremental revenue and margins that you would want to see with key addition of these outlets leading up to 2030? Mr. Mota, I think you'd be better to answer this in a Yes, specific will take this question. See the target, what we look at is from an EBITDA perspective, we should be having post India as I'm talking about, we should be between 22% to 23% of EBITDA at a level. Got And on the revenue front?

18:38 The revenue, since with the openings, etcetera, we are contemplating that we should be growing at a number of around 22%, Got it. Including the same store and the expansion of the new restaurants. Got it. Thank you so much and wishing everyone a happy Diwali. Thank you. Same to you. Thank you. Thank you. Next question is from the line of Anikit Gambli from ICIC Securities. Please go ahead. Hi, sir. I just wanted to check on...

19:25 So you mentioned that delivery will be going up at that time. We wanted to check because as we cover QSR also, right, the... And then QSR, whenever the labor is going up, your margins take a hit. What is your sense or what is your view on as delivery increases, it may also impact our margins a little bit? I would take this question. I fully appreciate where you're coming from. See what happens is we are only 30% on delivery, the 70% business is based on restaurant only. So this is a cost optimization for us and we are working hard to increase our dine in business as well. So the competitions would continue, but with the dine in business growing, that would be neutralizing the impact of cost on delivery.

20:18 Net net there would be an improvement. Sir. And just wanted to follow-up on this. The delivery customers that we are getting in, is there any possibility that these customers that we are getting, are these the new customers? So let's say 20% to 30% of them could be the new customers that are working into our branch? See, we don't get the delivery customer data point, but what we gather from aggregators is that 24... 5% of our... These are loyal customers and 75% of the guests who get into delivery are the newcomers. Okay, sir.

21:04 And just one last question from me. What will be the liquor mix for this quarter? We operate at around eight to 9% of our total revenues as liquor. Next question is from the line of Manish Bihane from Dakshum Capital. So sir, we have observed that Belgium waffle, which has been operating in Mumbai for last decade, the same sales same store sales growth was around 20% in FY 'twenty five.

21:52 Can you show some light on other brands like Asia Kitchen and Mainland China? What has been their sales sales growth in your largest and oldest market, mainly Mumbai and Kolkata? I would take this question. See, I would not comment on any other brand, but as you rightly asked for Asia Kitchen brands of old and new restaurants. See, Asia Kitchen is the one which is getting focused on from our business standpoint. From Mainland China, there have been conversions of Asia Kitchen. Wherever the conversion or renovations have happened, the business has grown by 25% to 30%.

22:38 From a because sorry? No. Yes, sir. So we look at, let's say, for instance, when we talk in terms of our existing Asia kitchens, we'll work towards that the same store should grow between 10% to 15% for the oriental brands. Ladies and gentlemen, to ask a question, you may please press star Next question is from the line of Divesh Woora, an individual investor. Please Sir, am I audible?

23:46 Please. So we planning about 200 restaurants by 2030. And I just I'm just attending your call for first time. So can you throw light on what is your first restaurant cost which gets incurred in terms of CapEx and operating at a breakeven level so that we have an idea on what kind of CapEx plans you have because what when I'm seeing your cash flow, you have about INR 50 crores cash flow this year on an operating activity level. So are you going to retain the investments and plan to only use the CapEx of the operating profit which are making? See, your point is well taken. Sir, what has let's say, when we talk in terms of CapEx plan, have been just detailed by Mr. Vivek for the next three years, what we are looking at is the so for a restaurant, let's say, we spend between INR 4.5 crores to odd INR 4 or 5 crores.

24:47 So we look forward to the spend to be INR50 odd crores in a year. And going forward, we will be able to generate this kind of revenues and we should be cash flow positive in years to come. If I have to take four years down the line, about INR 200 crores or INR $2.50 crores, so you are talking about the divided by five is the plan that way going on? Absolutely correct, sir. That answers my question. Thank you, sir. Thank you. Thank you. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to management for closing comments.

25:42 On behalf of the management of Speciality Restaurants Limited, we are extremely thankful to all the participants to the earnings call of Q2 FY twenty twenty seven of the company and to have spared your valuable time and had wonderful interactions on the financials of Q2 FY twenty twenty seven. We look forward for promising quarters going ahead and with further more interactions in time to come. Thank you so very much. Thank you. Ladies and gentlemen, on behalf of ICICIA Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.