hat does it do?
Speciality Restaurant operates several food chain restaurant like Mainland China and Asia Kitchen.Some its new concept are Hoppipola specially targeted towards youth. Most of us would have visited one of its branded restaurant if you arr major cities. Below are its brand.
Cafe Mezzuna: Semi-casual dining restaurant and specializes in Mediterranean, Moroccan, Spanish, French and Italian cuisines.
Flame & Grill: Restaurant specializes in Kebabs.
Haka: Restaurant specializes in Dim sum; a style of Cantonese cuisine.
Hoppipola: Bar; offering mostly finger food.
Machaan: Offers Indian cuisine.
Mainland China: Flagship restaurant. Restaurant offers Chinese food and has over 50 outlets.
Mainland China Asia Kitchen: Offers cuisines from Asia, beyond Chinese.
Sigree Gobal Grill:
Sweet Bangal: Confectionery.
Why its an Opportunity?
Speciality restaurant has for last two quarters has been making losses . The company attributes this to rising input cost and its inability to increase it prices as it may impact the footfall.
The current market cap of the company is 408 crores. It has about 120 odd restaurants. So roughly if you were to buy the entire company you are paying about 4 crores for each restaurant. Most of their restaurant are on rental premises.
How will it turnaround?
Closing down the restaurants that are not profitable.
Converting Mainland china to Asia Kitchen so that its a longer format and can sweat the assets better
Obtaining more liquor license for new format of restaurants so that it attracts more footfall and expands margin as liquor business has higher margin- Hoppipola
Foreign expansion - This should yield in higher margin
Some of restaurants are in the same building this should sweat the assets better.
Anjan Chaterjee and Susim Mukul Data seem to have a credible background . Anjan is passionate about the food business and having a passionate promoter is always a plus
If company is able to increase its sale from present 320 crores to 400 crores and its able to attain a operating margin of 15% -20 %as it did in the past is should make a operating profit of 60- 80 crores. Comparing it with like of jubilant food works which is the closest comparison we can get in the listed space it should have market of 1200 croes - 1500 crores market cap. This would be a three bagger from here. I dont see the stock coming below 65 rupees as then you would get 120 restaurant pretty cheap . Hence the downside is pretty limited.
However it would take sometime for the business to turnaround.
What are the risks.
The risks are that the company might not be able to turnaround and might still struggling to profits.
The online food chains could be another competition.