Buy

Laboratory to Kitchen - Cooking up a Storm We initiate coverage on Borosil, a thinly researched stock and a household name in the microwaveable glassware industry, with a BUY and TP of Rs300. Fortified by decades of experience, a powerful brand and a distribution network, the company commands ~60% market share in the microwaveable glassware industry. This is likely to be successfully leveraged by diversifying into new consumer categories. The company's highly profitable cash cow - the Scientific and Industrial Products (SIP) division, which commands a ~60% market share in the lab glassware segment,...

Valuation and rating: Valuation and rating: We value La Opala at 38x on Dec 22 EPS of Rs 10 leading to a TP of Rs 380 an upside of 81%. The company has delivered EBITDA that has consistently outpaced revenues, with margins more than doubling in the last 10 years (ending in FY20, a pandemic-driven aberration). Free cash flow generation and conversion of EBITDA to FCF have been regular. While current and attributed valuations may appear demanding, we strongly believe they are justified in view of above mentioned prospects, option-value of new businesses not backed in, and clear examples of valuation expansion...

The cooker & cookware industry saw a robust uptick in demand led by accentuated preference for home cooked food owing to the pandemic. Revenue trajectory for Hawkins also accelerated with the company nearly covering up its lost sales of Q1FY21 (30% YoY de-growth) by 9MFY21. Revenue for 9MFY21 is now marginally down 0.5% YoY to | 525.1 crore. We believe higher discounting during initial quarters and change in channel mix may have led to gross margin contraction of 395 bps YoY to 52.0%. However, tight leash on operating expenses (down 6% YoY) resulted in...

About the company - La Opala RG Limited was the first to introduce opal glass in India. The Company is engaged in the manufacture and marketing of opal glass tableware and 24% lead crystalware products. Over the years, the Company has emerged as India's largest tableware and glassware lifestyle brand. La Opala is the market leader in Opalware segment with a dominant market share of 50% in its category. The company has two state of the art plants located at Sitarganj...

Revenue trajectory decelerated in Q4FY20 owing to nationwide lockdown from mid-March onwards. For 9MFY20 (April-December), Hawkins continued to outperform peers with revenue growth of 13% YoY. New product launches and higher marketing spending aided topline growth. However, due to significant fall in revenues in Q4FY20, Hawkins exited FY20 with topline growth of mere 3.2% YoY to | 673.9 crore. Despite subdued topline growth, it saw significant improvement in margin profile with EBITDA margins expanding 220 bps YoY to 15.4% in FY20 (one of the highest...

With the company reporting moderate revenue growth in FY13-18 (6% CAGR), FY19 was a turnaround year for Hawkins cooker. The company reported one of its highest topline growth of 18% YoY to | 652.8 crore in FY19. New product launches (five new products launched), coupled with higher marketing spends (up 31% YoY to | 34.7 crore) aided topline growth. Over the years, the pressure cooker industry has grown at a slower trajectory (low single digits), on account of 90% penetration of LPG connections in the urban market. However, government initiatives like...

Pressure cooker industry revival to spur revenues Hawkins reported a robust set of Q1FY19 numbers with revenues growing 50% YoY to | 120.8 crore. Higher raw material expense led to a decline in gross margin by 110 bps YoY to 59.8%. However, with positive operating leverage kicking in, EBITDA margins expanded significantly by 580 bps YoY to 13.9%. Absolute EBITDA grew ~2.6x to | 16.8 crore. Lower other income (down 40% YoY to | 1.3 crore), restricted PAT growth, to a certain extent. Hence, PAT for the quarter came in at | 10.7...

Borosil Glass Works Ltd. (Borosil) Q4FY18 reported standalone sales at INR 88cr grew ~16% y-o-y and above our estimate, scientific-ware up ~16% y-o-y and consumer-ware up ~17% y-o-y.

Rs1.35bn new greenfield plant a long term positive We maintain our Buy on La Opala with TP of Rs353 and value the company on our conservative Adj. OCF/EV yield based methodology. We believe the company would continue to post strong double digit volume growth in the opalware segment on the back of affordable pricing and significant under penetration of the category. Further announcement of setting of new plant at a cost of Rs1.35bn would help the company increase capacity from current 25K MT to 37K MT which we believe would be utilised over ~2.5 years and the commercial production would start from Sep'19. Further the...