Hi
If we look at the FY18 results of Hopewell vs LaOpala it leads us to some interesting observations. OPM for HTPL is 6.7% va 41% for LaOpala.
- From a cost of materials consumed perspective HTPL spends double on packaging material than LaOpala for every rupee of sales
- HTPL has 60% more raw material cost too as a % of operating revenue. These two points are major areas. Now the Borosil management does say they are getting to operational efficiency and thus I think their differences on these two with LaOpala will narrow down.
- In addition to the above 2 points HTPL even spends double on freight forwarding. This too will change as per Borosil management due to efficiencies kicking in.
- Other points include - HTPL is carrying more inventory as a proportion to sales (on this the management says they dont want to dump products on channel partners) , it pays more salary to its employees, HTPL also has more loss due to discarded PPE
- I could not figure out the marketing budgets for LaOpala but HTPL has significant budgets ~5% to its own sales. Borosil management is going aggressively to increase this in the coming quarters 13% to 14% of revenues.
Borosil (Larah) should be able to improve margins but I don’t think it will reach the levels of LaOpala. Despite Borosil’s management saying they are not gunning for market share as the market is expanding this is going to put pressure on LaOpala margins which I think will not be sustainable in the future. Larah top line will also get a decent bump up putting further pressure on LaOpala. Like I mentioned in the Borosil thread Larah is undercutting Laopala on pricing and this is an important point in marketing and product positioning decisions which will do the rounds in these two companies. Interesting.
Regards
Deepak