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...

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...

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...

We downgrade the stock to Hold with TP of Rs550 (earlier TP Rs555) as we value the company on our conservative Adj. OCF/EV yield based methodology. While the revenue growth has bounced back in the quarter on the back of re-stocking and healthy festive season demand along with margin expansion, competitive intensity continues to remain high. Our channel check suggests that both Borosil and Cello have launched new designs in the market and continue to offer higher trade margins. Uncertainty regarding use of cash on books while valuations at 41x/31x...

Strong Growth in Topline During Q4FY17, High Advertisement Cost Dents EBITDA Margins: La Opala RG Ltd (LORG) revenue witnessed a growth of 41.2% in Q4FY17 to Rs.761 Mn compared to Rs.539 Mn in Q4FY16.EBITDA Margins for the quarter stood at 27.2% compared to 37.9% in Q4FY16 witnessing a drop of (-) 1070 basis points (bps)mainly on account of jump in advertisement cost. LORG was able to better manage the raw material, employee and power cost during the quarter. PAT during the quarter stood at Rs.135 Mn compared to Rs.142 Mn in Q3FY16 and PAT Margins stood at 17.7% in Q4FY17, a drop (-) 868 bps compared to 26.4% in Q4FY16.

Moderate Growth, Operating Performance Continue to Sustain during H1FY17: Moderate Growth in Revenues during H1FY17, but strong operating performance - La Opala witnessed a flat growth of 5.2% YoY in revenues the half yearly basis. Topline during H1FY17 stood at Rs.1209 Mn compared to Rs.1149 Mn in H1FY16. However, the absolute EBITDA grew by 22.4% YoY during the first half with EBITDA margins improving by 527 basis points (bps) with 37.6% in H1FY17 compared to 32.3% in H1FY16, mainly on account of decrease in the raw material, power & fuel and advertisement expenses as % of topline. EBITDA during H1FY17 stood at Rs.454 Mn compared to Rs.371 Mn in H1FY16.

The commencing of the additional 8,000 MTPA at the Sitargunj unit in November 2015 will ramp up the capacity by 16,000 MTPA creating enough room to scale the mid premium brand Diva', rapidly in the years to come. Introduction of the borosilicate cookware products to widen the product portfolio and increasing advertisement spends to create a brand for the company. We expect the company to grow its revenue at 25% CAGR in FY15-17E