La Opala RG - Aspirational consumer story


(Atul Garg) #21

Thanks for the inputs on the promoters Vivek.

Not sure if doubling sales from 33 to 74 cr is imp at this point of time. The profit did went up from 3.8 to 13 during same period.Company has been growing steadily.Increasing nuclear families, increasing disposable incomes, improved brand visibility and introduction of new line products (crystal ware) only add to further growth.

Thanks for bringing the Anti Dumping thing N Sood. Anexcerptfrom the same link posted in my earlier post.

"At that time, import duties were around 60-70% which has been progressively decreasing every year. this has eaten into La Opala’s mkt share to an extent. the main foreign competitors were luminarc and corelle. besides diversification into a whole new product category, the company has been doing things like sprucing up distribution, bettering designs etc on an ongoing basis.

“Diversification was an obvious choice. We decided to get into a new product category: crystal glass,” says Ajit Jhunjhunwala. “Once again we entered a South Korean collaboration for technical expertise, this time with Doosan Glass.” Crystal glass, which was manufactured in the company’s second Madhupur plant equipped with the latest South Korean technology, was another great hit."


(Atul Garg) #22

So as Vivek & You yourself pointed out, anti dumping will help but company is certainly not dependent on that.


(Rudra Chowdhury) #23

Good work Atul :slight_smile: Please continue.

Allow me to play the devil’s advocate and develop a strong bear case.

Establish the market size in Opalware & Crystal glass. You will get a hint of things to come. Look at the share of organized players, base growth rate. La Opala’s growth projections can come much later.

Another red flag: management compensation.


(Aditya) #24

Just a query. How expensive is Corelle compared to Opalware? And how does Opalware compare with melamine sets?


(Subash Nayak) #25

Microsec guys are awesome. In a single report they have recommended bunch of good small/midcap stocks in their 9th September report (ARBL, La Opala, Wimplast, Cera, Somany Ceramics, Zensar, Dhanuka agro, PI industry and Tide water). The first 4 are being actively discussed at valuepickr.

http://www.microsec.in/Static/Pdf/Microsec%20Small%20&%20Mid%20Cap%20Picks.pdf


(Atul Garg) #26

Thanks all for bringing some balance in the discussion.

For opportunity size, not much information, I could find.

However below is a table that tried to capture based on the available information. Domestic revenue can be determined easily (+-5% error ).

Assumptions:

Domestic market size: 400 cr in 2009 (based on the information that laopala had ~10% share)

Growth of 12% (conservative, growths is somewhere 15-20%)

â12

â11

â10

â09

â08

Domestic Market Size (Cr)

629.41

561.97

501.76

448.00

400.00

Domestic Revenue

95.42

78.69

57.65

42.89

38.21

Domestic Market Share(%)

15.16

14.00

11.49

9.57

9.55

Export Market Size

Export Revenue

Export Market Share

Domestic as % of revenue

83.00

82.00

77.00

69.00

75.00

Export as % of revenue

17.00

18.00

23.00

31.00

25.00

So la-opala seems to increase its market share constantly with ~15% market share currently with in an industry growing at 15%.

Moderate substitute product Risks: Melamine & Steel are real substitute products and there is a reasonable risk of substitute products. At the same time, I would like to add melamine/steel utensils are used more for routine use, where as opalware/glassware are more geared towards parties/special occasions and for guests (Nevertheless they are needed). So the use case is different.

For gifting and Teas sets, melamine/steel is no where compared to glass/opalware.

Not much information about correlle pricing.


(Subash Nayak) #27

The value pick guy recommended La Opala RG as HOLD and this stock is up 14% in a go.


(Rajarshi) #28

Subash ji,

The stock has move aggressively since the last two days.Are valuations getting stretched to a certain extent?


(Hitesh Patel) #29

Good pick subash.

keep up the good work.


(Subash Nayak) #30

Hi Rajarshi,

Delivery percentage of just 8% is giving me a feel that not everything is OK with this stock. Irrational exuberance as a result of value picks guy recommendation (which was just hold, not even buy) seems like the cause.

I have a small amount of La Opala RG, bought at 30% lower than CMP, and intending to hold for long term, so not sure whether to sell it or not because of this irrational upmove.

Not even planning to buy until price stabilize to a level and delivery percentage move to a better level.


(Rajarshi) #31

La opala has corrected from around 280 to below 250 levels and is quoting at less than 30 dma…it has resistance at 232 levels below which it can slide further…it is a great stock for a 1-2 yr outlook…


(Deepak Swamy) #32

Performer of the Day!
Q3/Fy-13 Results out…

Total Income up 71.7% to 50.17 Cr from 29.22 Cr.
EBIDTA up 82.6% to 14.55 Cr from 7.97 Cr.
Profit before Forex gain/loss DOUBLED to 12.24 Cr from 6.13 Cr.
Net Profit almost TRIPLED to 9.28 Cr from 3.69 Cr.

EBIDTA margin is 29% v/s 25.8% (SQ-12) and 27.3% (DQ-11)
NET Profit margin is 18.5% v/s 12.1% (SQ-12) and 12.6% (DQ-11)

Total Raw material costs as a %ge to Income is 20% v/s 16.8% (SQ-12) and 17.1% (DQ-11)
Employee costs to Income is 10.6% v/s 12.8% (SQ-12) and 14.1% (DQ-11)
Power & Fuel expenses to Income is 14.8% v/s 17.2% (SQ-12) and 17.1% (DQ-11)
AD & Sales Prom expenses to Income is 13.8% v/s 10.4% (SQ-12) and 9.1% (DQ-11)
Other expenses to Income is 11.8% v/s 17% (SQ-12) and 15.2% (DQ-11)

Financial costs to EBIT is 8.8% v/s 14.6% (SQ-12) and 10.3% (DQ-11)
Tax Rate 24.2% v/s 36.3% (SQ-12) and 31.8% (DQ-11)

Raw material costs Doubled keeping pace with Sales. Buttttttt…
Employee cost was up only 28.6%; power & fuel costs up 47% and other expenses up 33% Gains from which was utilized for Advertisement, Sales and promotion - expenses of which Tripled to 6.9 Cr v/s 2.7 Cr.
Then Nil Forex gain/loss v/s Forex loss of 72 lacs last year AND Lower tax rate helped Net profits.

9M/Fy-13 v/s 9M/Fy-12:
Total Income up 35% to 113.98 Cr from 84.57 Cr (Fy/11-12: 115.01 Cr)
EBIDTA up 41.3% to 29.54 Cr from 20.9 Cr (Fy/11-12: 26.85 Cr)
Net Profit up 75.7% to 16.55 Cr from 9.42 Cr (Fy/11-12: 12.6 Cr)

Tax Rate 28.6% v/s 31.4%

Reported 9-month EPS 15.61 v/s 8.88 (Fy/11-12: 11.89)
Recorded TTM diluted EPS: Rs. 18.64

At 03:25 pm on 04/02/2013, stock on BSE trading at Rs. 255/- Up 8.4%
(Just Five-minute window of opportunity was there for vultures to pick this up)


(Gaurav Chandak) #33

yup.

block buster results.


(Atul Garg) #34

Thanks for the result update Deepak.Really good results. Though lot of volatility in price,This is another stock which I like and think can be held for long (Need to substantiate this with more facts though). However improving margins and capital use does indicate that they are able to handle competition well while improving efficiencies.


(Rajarshi) #35

Marriages and festivities in India mostly happen these two quarters. I attended quite a few marriages and invariably a dinner set/tea setas a present always cropped up. Was quite amazed to see the variety present in the shopping Malls.The prices at which the items are priced are also quite reasonable. The volatilty in the stock prices is due to operators but this time the delivery volumes have been good.


(Subash Nayak) #36

La Opala has been hitting UC for last 2 days. Anyone has info on the news item which is driving this up in such crazy manner.


(nabendu) #37

This (though a bit dated) could be one reason for thiscraziness -

http://www.bseindia.com/xml-data/corpfiling/AttachHis/La_Opala_RG_Ltd_270213_SAST.pdf

Also with random ups-and-downs, trader/operators are quite active in this counter.

I would personally exit if it nears 400/-, as at that price PE > 20 and P/B around 8 looks expensive to me. What is your view Subash ??


(Subash Nayak) #38

Hi Nabendu,

Looking current PE is sort of driving looking at the back side mirror. One should look for future earning potential and decide future buy/sell decision.

With recent doubling of capacity, La Opala is geared for moving to next orbit. Last quarter is sort of glimpse of what is coming in future quarter (sales up from 30cr to 50cr y-o-y and NP up from 3.7cr to 9.3cr). So it is quoting at around 10 FY pe (assuming next 3qtr will have ~9cr NP), which I think is a pretty reasonable pe.

I am thinking of adding a little bit of La Opala in coming months (I invest in once in a month, sort of like SIP on my chosen stocks) in a staggered manner. It seems to me a nice play on indian secular consumption boom.

Regards,

-Subash

thiscraziness -http://www.bseindia.com/xml-data/corpfiling/AttachHis/La_Opala_RG_Ltd_270213_SAST.pdf


(Subash Nayak) #39

One exception my previous comment: It make sense to sell a small % of stock if technical indicators tells that the stocks has reached a over-bought level, and the stock has started showing price weakness, and buy the same stock at a lower level.

Without much knowledge on technical analysis I can’t take such call, and rely on TA experts at valuepickr to take such decision. Without anyone mentioning it, mine is a buy-and-hold type of investment with very less transactions.


(Om) #40

Wow!! what a run (40%) in two days…

I would suggest to sell 20-30% of your holdingif itgoes to one more UCandhold onremaning for long termas Subash mentioned.

http://smartinvestor.business-standard.com/market/Smartmoves-163624-Smartmovesdet-La_Opala_RG_soars_44_in_two_straight_sessions.htm

Love the line “creeping acquisition” earlier in case of Ajanta and now in La Opala…hope this keep on going like AP:)