This restaurant stock served 210% returns to investors; did you take a bite?

The Indian stock market has delivered a huge number of multibagger stocks in the past year, thanks to a strong rally in benchmark indices as well as an increase in the risk appetite of retail investors in pursuit of greater returns. Speciality Restaurants is one such stock that has rewarded its investors in the last one year, thanks to a healthy financial risk profile and established market position with strong brands and wide geographic reach. However, sluggish demand amidst the impact of coronavirus pandemic on the restaurant industry remains a key concern for the company.

Speciality Restaurants is in the business of restaurant operations across India and abroad. With a market capitalisation of ₹685 crore, the smallcap stock surged from ₹47.4 on February 11, 2021, to ₹147.65 per share in intraday trade today, delivering more than 200% returns to shareholders in 12 months.

Speciality Restaurants is one of the largest restaurant chains in fine-dining space in India. It also operates restaurants in U.A.E., Qatar, Bangladesh, Tanzania, Sri Lanka and the U.K., and is set to open operations in the U.S. Its flagship brands include Mainland China, Asia Kitchen by Mainland China, Riyasat, Barishh, Episode One, Oh! Calcutta, Sigree/Sigree Global Grill, Haka, Flame & Grill, Café Mezzuna, and Hoppipola. Sweet Bengal and Dariole are the company's confectionary brand.

Here’s how Speciality Restaurants shares fared in past one year

Shares of Speciality Restaurants have delivered consistent return throughout the year. It has risen 112% in the past six months and 51% in the past one month. The stock has grown 55% in the calendar year 2022 (year-to-date basis) and 20% in the last one week. In the long term horizon, the stock delivered 54% return in 3 years and 94% over the past five years.

On Friday, Speciality Restaurants shares opened higher at ₹127.85 against previous close price of ₹126.80 on the BSE. During the day’s trade, the stock gained as much as 16.5% to hit an over three-year high of ₹147.65 amid spurt in volume trade post strong third quarter earnings. In contrast, the BSE Sensex dropped 680 points, or 1.15%, to 58,246.

It was trading higher than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. Technically, the stock turned ‘bullish’ from ‘mildly bullish’ on February 4, 2022, at ₹118.95, as per stock research platform Markets Mojo.

Strong Q3 profit boosted stock rally

Speciality Restaurants has registered robust earnings in the December quarter of 2021, despite restrictions due to the Covid-19 pandemic. It posted a consolidated profit after tax (PAT) of ₹11.20 crore in the December quarter (Q3FY22), compared to a loss of ₹3.69 crore in the same quarter last year, and profit of ₹2.60 crore in previous quarter (Q2FY22). The revenue from operations surged 57% year-on-year (YoY) to ₹88.99 crore against ₹56.81 crore in the corresponding period prior year.

For the 9-month period ended December 31, 2021, the company posted net profit of ₹5.23 crore as against net loss of ₹37.77 crore for the same period last year. The total income more than doubled to ₹187.23 crores as compared to ₹91.32 crores during the 9-month period ended December 31, 2020.

During the quarter under review, the company started commercial operations of "Chourangi" restaurant in London under the joint venture agreement through its wholly-owned subsidiary.

In its earnings report it said that its operations are currently continuing as permitted by local regulations due to the Covid-19 pandemic. “As on date most of our restaurants and confectionery stores are operational. Selectively at the local level, various restrictions continue to apply and consequently impact operating performance,” it said.

Given the business disruption caused by the Covid-19 pandemic and subsequent lockdowns, the group has been in discussion with the landlords for its restaurant and confectionery properties for waiver or discounts on rent and common area maintenance expenses during the lockdown period and also for the period thereafter. “The group has received various concession/rebates from the landlords with few of them still under discussion. The group is following a prudent accounting practice and has/will recognise these concessions/rebates in accordance with the applicable accounting standards,” it said in its December quarter earnings report.