La Opala RG Ltd - 32.00 Rs
Incorporated in 1987, La Opala RG Ltd (LORL) is engaged in the manufacturing and marketing of opalware and crystalware in India. It is among the very few well-established domestic crockery brand in the country with a range of 100 products including dinner sets, tea sets, coffee sets, soup bowls & spoons, mugs, plates, casseroles, flower vases and other table wares. Infact, LORL is the market leader with 50% market share in opal ware and 20% market share for crystal ware. While the opal glass tableware is retailed through franchises under the La Opala brand, handcrafted crystal ware are sold through select exclusive outlets under the Solitaire brand. Company’s USP lies in elegant designs, world class quality, microwave safe, chip resistant and 100% recyclable mark. Notably, company is having good distribution network with approx 50 distributors & 9300 dealers. Apart from having pan India presence company is also exporting to 30 countries across the globe including US, UK, Spain, Belgium, France, Germany, Japan, Dubai etc.
LORL’s manufacturing facility is located at Madhupur in Jharkhand having an installed capacity of 3,500 MT & 1,080 MT for opal ware and crystal ware respectively. In order to meet the growing demand and increase its market share company has recently set up a new unit of opal ware at Sitarganj - Uttrankhand with a capacity of 4,000 MTPA at a cost of Rs. 35 cr. Hence company has more than doubled its opal ware capacity to 7500 MT from 3500 earlier. Apart from being fully automated, this plant uses alternate source of fuel i.e. electricity for heating the furnace instead of LPG & furnace oil which are currently used as fuel in the Jharkhand plant. This would lead to a substantial reduction in the fuel cost. Besides, this new plant also enjoys an exemption of excise duty and income tax for 10 and 5 years respectively. Hence in near future company is contemplating to reduce its capacity utilization at its Jharkhand plant & shift manufacturing to new plant to avail lower fuel cost & tax benefit. However, although company has started commercial production in Sept 2007 at its new facility, but due to certain technological backlog, the plant is yet to operate its full fledge production. Meanwhile, company has started exploring the opportunity of supplying its products to big hotel chains in the country which would further aid the growth of the company. It is also increasing its foucs on exports and target to achieve more than 40% of turnover from overseas markets in coming years.
The current euphoric growth of the Indian economy, the rise in the disposable income, increase usage of credit card, maverick changes in the aspiration and emotional level of the consumers and their changing life style have resulted in increase in market size of company product. And LORL with its established brand name, wide network, high quality and large variety of products is all set to capitalize the opportunity. Financially company is estimated to report bumper result for FY09 on back of improved margins and increased revenue from new plant becoming fully operational in few months. At the same time, on the back of higher interest cost and depreciation cost its FY08 nos look very disappointing. For the Dec qtr its sales increased by 20% to Rs 15 cr but NP stood at 0.01 cr against 1.30 cr last fiscal. But for FY09 it is estimated to clock sales of 75 cr and PAT of Rs 7.50 cr i.e. EPS of Rs 7 on current equity of 10.60 cr. With a gross block of around Rs 55 cr and book value of Rs 35, its a value buy at current EV of approx Rs 50 cr. Still investors are advised to accumulate at declines only as scrip can drift down further to hit new lows.
