Buy La Opala R G - Microsec

We rate La Opala R G Ltd a BUY. La Opala, Promoted by Sushil Jhunjhunwala, is India's leading manufacturer of semi-vitreous tableware and kitchenware. It has a wide range of opalware and crystalware products selling under established brands like La Opala, Diva and Crystal. The company also exports its products to more than 30 countries. It has products spread across the value chain. It also channelises its products through modern retail stores.

Commencement of its Expansion plan of Opal Ware Capacity at its Sitarganj plant: The company, which had earlier taken a capacity expansion plan with a capex of around INR25 crore, at its Siatrganji Plant in Uttarakhand, for doubling the capacity of its Opal ware to 12580 metric tonnes, has started its commercial production from July 2012. This is expected to boost the Sales of the company going forward.

Established Brand name in Crockery Segment : La Opala has an established brand name in the crockery segment in india. It has products spread across the value chain. It's brands - 'La Opala' caters to mass market whereas 'Diva' and 'Crystal' caters to high-end market. It has 100-strong distributor network to support the growth of its brands.

Strong Growth in Financials in FY12: La Opala's Net Sales increased by 19% to INR115 crore and Net profit Ex EO jumped by 37% to INR12.7crore in FY12. EPS came at INR12.0 per share. ROE of the company came at 25.2% with a D/E ratio of 0.24. It has also been a consistent dividend payer from past 10 years.

Anti-dumpting Duty imposed on imported glassware from China and UAE to benefit La Opala: Indian Government has imposed an anti-dumpting duty on cheap imports of opal glassware from China and UAE for a period of 5 years on December 2011, attracting a duty in the range of 36-110% of the landed cost. This action, unless revoked, will help in increasing the market share of the company and benefit the company in the year to come.

VALUATION

At the CMP of INR127 the stock discounts its FY13E EPS of INR14.4 by 8.8x and its FY14E EPS of INR19.8 by 6.4x. With Established Brand name, Completion of Expansion plan, and Consistent financial growth, the company is expected to perform better.

Key Concern

Rising competition from foreign players and also unorganised companies in the domestic market is a major concern for the company.

Increase in the Raw Material prices may negatively impact the bottomline of the company.

Source : Equity Bulls

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