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Speciality Restaurants - A Technical & Fundamental Update

Speciality Restaurants Ltd (SRL)'s revenues grew by 9.1% to Rs73.6 crore. The gross profit margin (GPM) contracted by 74BPS YoY due to a higher input cost whereas the operating profit margin improved by 36BPS YoY as a result of lower rental and other expenses. However, PAT declined by 43.4% YoY due to higher depreciation charges and lower other income in Q4FY2015.

Though the company witnessed a steady level of footfalls, consumer discretionary spending was moderate during the quarter even though there was no price hike during Q4FY2015. At the same time, the company continued to witness lower sales during the week days of the quarter.

The company is of the opinion that raw material prices would soften in the coming quarters which would help expand the GPM while an improvement in consumer discretionary spending at a gradual pace would help to post a better financial performance in the coming years. SRL will continue to focus on development and refurbishment activities to improve its operating performance.

In view of the Q4FY2015 performance, the pressure on the GPM and the slow pace of increasing consumer discretionary spending, we have marginally tweaked down our FY2016 and FY2017 earnings estimates. However, we retain our Hold recommendation on the stock with a revised price target of Rs195.

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