La Opala- Capacity Addition, New Product Category Provides Growth Visibility Over Medium-Term: HDFC Securities

HDFC Securities Retail Research

Given the size of India’s opal ware sector, the vast under-penetrated population, consistent population growth and rising aspirations of the fast expanding middle class, we believe that opalware remains one of the most sustainable consumption stories in India.

La Opala RG Ltd. is a leader in mass and premium product categories, which are mainly led by aggressive branding and strong distribution. The company has been consistently operating at best-in-class margins of 35% plus, which is the highest in the entire consumer discretionary space.

This has resulted in a strong debt-free balance sheet and decent return ratios. It has constantly leveraged its superior brand recall through product launches in both -for-money and premium segments.

We expect the company to benefit from its leading position in the opalware and tableware segments, while we expect premium product launches to de-risk its revenue stream.

Significant capacity addition, venturing into new product category (borosilicate glass), favorable consumer demand provides growth visibility over medium term.

Key triggers

• Revamped distribution strategy,

• Entry into borosilicate glass category,

• Capacity addition to drive the growth,

• Balance sheet to remain lean.

Key Risks

• Higher competition,

• Removal of anti-dumping duty on opalware imports,

• Volatility in raw material price.

About the company

La Opala, incorporated in 1987, is promoted by the Jhunjhunwala family. It is one of the leading players in tableware products (opal and glass) in India.

The company’s production facilities are located at Madhupur, Jharkhand and Sitarganj, Uttarakhand, for opal ware segment and glassware segment. Both the plants have European technology and equipment from the best manufacturers in the world, reflecting higher asset utilization, faster investment returns, and faster processes.

The company is a leader in the Indian tableware market, whose products are favorites in countries like US, UK, France, Turkey, the Middle East and other South East Asian countries.

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