La Opala RG Ltd was recommended 12 months back at a price of Rs 100, now quoting at Rs 200. Upside of 100%

1. La Opala RG Limited
Witnessing a stupendous success in Glass Industry in France, La Opala RG Ltd, forayed its operation in
Indian market in 1988 with the corporate mantra of “Adding Style To Your Lifestyle”. Today it touches
over millions people’s life through its beautiful products. The Jhunjhunwala led company went for IPO in
1995. The company has the rich experience of over 70+ years in the industry. The company is moving
towards high growth period & is bound to grow rapidly in years to come.
“Business Insight” stock for the month of Sep 2011
HBJ Capital, India
Web: www.hbjcapital.com
E-Mail: info@hbjcapital.com
Call: +91 98867 36791

2. Systematic buying between INR 80 to 100
2 Phase Buying Strategies Suggested [Always buy in SIP ways]
1st Phase: Buy at the current price range Rs 100-110 [50% of investment]
2nd Phase: Add if the price falls down to Rs75-80 [50% of investment]
>>>Expect at least 4-6 times returns in next 2-3 years time frame!!!

3. Table of Contents
1. From the Desk of CEO, HBJ Capital – (Page –4 )
2. The Indian Table Ware Industry – (Page – 6)
3. La Opala RG Ltd. – (Page – 10)
4. Management & Shareholding Pattern – (Page – 16)
5. Financial Analysis – (Page – 19)
6. Technical Analysis – (Page – 25)
7. Investment Rationale – (Page –28)

4. From the desk of CEO, HBJ Capital
Dear Members,
I am sure that the letter finds you in good spirits, are you ready to jump into the
market to catch gems at the bottom? I hope that most of you must have taken our
advise based on Market Outlook Reports & now sitting on 25-30% of cash in hand.
A recap from my earlier letter for our new investors –
“The Middle Class is undergoing a dramatic change with focus shifting from
fulfilling basic needs to desires and aspirations. I believe that as the reference point
of average consumer keeps moving up the income ladder, so does the demand for
branded higher performance items, even though at higher values.”
Continuing with our focus on India growth story and burgeoning
middle class in particular, our research team has picked a gem from
Opalware crockery segment.
India is the second fastest growing major economy in the world. India’s GDP on
purchasing power parity (PPP) basis was estimated to be USD 4.20 trillion in 2010
making it the fourth largest economy in PPP terms. Opalware crockery is estimated
to have a market size of Rs. 600-700 crores and is expected to grow at a CAGR of
20% in the next 5 years.

5. Contd
The organized Opalware industry is estimated to be around Rs 200 crores. The market size for Crystalware is smaller and
is estimated at around Rs 15 crores. As the number of families in India increase, the demand for tableware per family will
increase which will augur well for the industry as a whole.
The increase in savings has raised the standards of living of the society in general. Shift of consumer preference towards
branded items is likely to have a positive impact on the industry. Moreover, as lifestyle improves, demand for quality
tableware will increase which will increase the demand for products from the organized sector.
Our selection for “Business Insight” pick of the month is “La Opala RG Ltd”.
La Opala deals in Opalware and Crystalware products and has a strong product portfolio that spans over 100 products. It
is one of the established crockery brands in the country. Company is increasing its capacity in Uttarakhand by 4000 MT
which will take the total capacity of the company to 12580 MT. The full benefit of this expansion will accrue to the
company in FY13.
Happy Investing!
Regards,
Kumar Harendra, CEO, HBJ Capital, www.hbjcapital.com
#912, 1st "F" Main Road, Girinagar 2nd Phase, BSK 3rd Stage, Bangalore – 85
Call : 098867 36791, 080 6568 1134 or Mail : Info@hbjcapital.com

6. Indian Tableware Industry

7. Indian Tableware Industry
India is the second fastest growing major economy in the world. India’s GDP on purchasing power parity (PPP) basis
was estimated to be USD 4.20 trillion in 2010 making it the fourth largest economy in PPP terms. Opalware crockery is
estimated to have a market size of Rs. 600-700 crores and is expected to grow at a CAGR of 20% in the next 5 years. The
organized Opalware industry is estimated to be around Rs 200 crores. The market size for Crystalware is smaller and is
estimated at around Rs 15 crore.
The crockery industry comprises of Dinnerware, Tableware, Beverage, Barware in general. The Industry is estimated to
be around 500 cr. Billion of which more than 50% market share is dominated by unorganized sector. La Opala has 10% of
the market share & plans to grow by 25% Y-o-Y. In the organized market there are a good number of domestic players like
La Opala RG Ltd, Bharat Bone China Ltd, Hindustan National Glass & Industries , YEAR, TATA Ceramics along with their
multinational counterparts like Rosenthal,Villeroy & Boch, Noritake, Royal Doulton, Dunoon etc.
During the last decade tableware segment of glass industry has made strong efforts to improve quality of glass tableware
manufactured in India. It is heartening to note that by adoption of latest technology they are now producing international
quality glass tableware including those of opal and crystal glass. However, tableware segment of the industry is facing
tough competition from imports from China and other countries.
Price difference at which imported glass tableware are being sold in the Indian market suggests not only dumping the
goods in the Indian market but also evasion of customs duty. Urgent steps therefore need to be taken for checking this
unhealthy competition. Indian industry has made concerted efforts to increase exports. During the last few years the
exports have increased many fold.

8. Key growth drivers of Industry
Increasing per Capita Income - Per capita income to grow
USD $3600 in 2011 to approx. USD$ 5000 in 2015.
Increasing
Per Capita Increasing middle class population - According to
Impact of` Income NCAER, middle class population will increase up to 267 Million
Growth in in the next five years, up 67 % from current level.
organized Increasing
sector Middle
Class Growing Hotel & Catering Industry - Increase in Hotel
Population & Catering industry. There are some 1,980 hotels approved and
classified by Government of India. The hospitality industry is
Table Ware poised to grow at around 25-30% p.a.
Industry
Robust increase in the food industry – It opens new
opportunities for industries like Tableware, Food Processing etc.
Attraction Increasing
Towards Hotel &
Catering Impact of growth in organized sector - Growth will
Luxury
Products Industry attract unorganized players to organized sector.
Change in
Tax Change in the life Style of the people -The increase in
saving has resulted in standard of living of the people. There is
tremendous change with respect to branded tableware items
which is good for the industry.

9. Contd.
Focus towards nuclear families
The progressive evolution of family setup in India towards nuclear settlement will increase the demand for
tableware.
As the number of families in India increase, the demand for tableware per family will increase which will augur
well for the industry as a whole.
Increase in income
Income of Indian households has increased substantially in the last 10 years. In 2009-10, Indian households which
come under the middle income bracket and high income bracket increased to 62% and 20% respectively from 58%
and 7% in 2001-02.
Changes in income tax in the Budget 2011-12 will generate more disposable income in the hands of the public
leading to higher demand for consumer goods.
The rise in disposable income will benefit the industry as people will have surplus income to purchase goods such
as tableware.
Changing lifestyle of people
The increase in savings has raised the standards of living of the society in general.
Shift of consumer preference towards branded items is likely to have a positive impact on the industry.
Moreover, as lifestyle improves, demand for quality tableware will increase which will increase the demand for
products from the organized sector.

10. La Opala RG Ltd

11. Snapshot
Trading volume = 43000 shares (approx) per day – The
stock usually trades with low volumes, only during last 2-3
months volume has increased drastically.
EPS ~ 9.69 (TTM) – Company has recorded an EPS of Rs
9.69 during last 12 months.
 PE ~ 11.35 - On the basis of TTM earnings. The stock is
available at very moderate PE multiples, whereas, its margins,
ratios, market share, and balance sheet has grown
significantly over last couple of years. It should therefore be
re-rated and trade at higher PE multiples.
 CMP = 110.85 Rs (Sep 29th 2011)  Shareholdings : No of shares [% Share Holding]
 Total Institution: 11.9 Lakhs [11.28%]
 Total Individuals Holding: 18.71 Lakhs [19.16%]
 52 week’s high/low = Rs 135.8/55.05 – The stock  Total Promoters: 71.3 Lakhs [67.28%]
after making a 52 week high in Sep’11 has  Total Others : 2.03 Lakhs [2.28 %]
corrected by 18% during the ongoing market
correction.  Debt/Equity Ratio = 1.13 [Mar’11]
 Current Ratio = 1.33 [Mar’11]
 6 Month peak share price = Rs 135.8 –The stock  Interest Coverage Ratio = 2.11 times [Mar’11]
scaled a new 6 month high in September 11. The  ROCE = 10.83 % [Mar’11]
stock deserves as re-rating both owing to the  RONW = 7.49 % [Mar’11]
growth rate and historical valuations.  BSE Code: 526947

12. Basic Details
La Opala started manufacturing Crystal ware in March
1996, sourcing the exclusive right to use the technical
know-how, information, data for the manufacture and
sale of Crystal ware in India and abroad from Doosan
Glass of South Korea, a leading manufacturer of Crystal
ware globally. Headquartered in Kolkata, La Opala has
manufacturing units in Madhupur (Jharkhand) and
Sitarganj (Uttarakhand).
The company is increasing its capacity in Uttarakhand
by 4000 MT which will take the total capacity of the
company to 12580 MT. This expansion is likely to be
completed by April 2012 and will entail a capital
expenditure of approximately Rs 23 cr. The full benefit of
this expansion will accrue to the company in FY13.
La Opala deals in Opalware and Crystal ware products
and has a strong product portfolio that spans over 100
products. Crystal ware has Barware, Vases, Bowles,
Pitchers, Ashtrays, Beer Mugs where as Opalware has
Dinner Sets, Coffee Mug Set, Cup & Saucer Sets, Tea &
Pudding Sets.

13. Contd.
La Opala is one of the established crockery brands in the country. The
company has brands that cater to all sections of the society. “Diva” is the high
end brand of the company that caters to the upper segment of the market. It
contributes 40% to the company’s total sales. The 'Crystal’ brand also caters to
the upper segment and ‘La Opala’ brand is targeted towards the mass market.
La Opala enjoys large & strong distribution network across all over the
country. There are more than 10,000 retail touch points through which the
products of La Opala are sold. The products are supplied directly the leading
retailers such as; Pantaloons, Big Bazaar, Hypercity, Spencers, Reliance,
Lifestyle, etc.
The Company is operating in market more than 50% is dominated by
unorganized players. Under organized sector, it might face stiff competition
with some of the International players like Rosenthal, Royal Doulton etc.
These International companies plans to foray its operation by opening several
outlets in cities like Hyderabad, Gurgeon, & Chandigarh.
The company has made strong presence in countries like U.K., France,
Middle East & turkey. Apart from this, it also participates in “International
Trade Fair” in New Delhi & the biggest Tableware Fair In Frankfurt in
Germany every year to make presence stronger.

14. Capacity utilization can be improved by 50-60%
During 2007 [Plant capacity 4580 MT] – Company has spend Rs 7.73Cr for buying 4952 Metric tons of Chemical
(main raw material).
During 2010 [Plant capacity 8580 MT] – Company has spend Rs 9.03Cr for buying 5543 Metric tons of Chemical
(main raw material).
Conclusion:We have not see much increase in the raw material cost from 2007 to 2010, during the same period we
have seen 87% increase in capacity from 4580 to 8580 MT but there was just 10% increase in the raw material quantity &
just 25% increase in finished product, which clearly shown that they are using better technology or able to reduce the
wastage but they are under utilized at present and there is huge scope of increasing production. Expected capacity during
2012 will be 12580 MT. Think about the increase in product if these capacities can be utilized well.

15. Huge scope of increasing the production
 Now, if you look at the production of goods in 2007 and again in 2010, you will realize that they have increased the
production from 1.6 Cr units to 1.9Cr units which is a jump of 25% while there was 87% increase in the capacity for the
same period. Interesting fact is, they have increase just 10% more raw material to during the same period.
Also notice that there was 51% jump in the sales amount from 2007 to 2010, this is mainly due to the fact that per unit
cost of goods has gone up from Rs30.92 to Rs38.62 which is 25% jump in the finished product price.
Now, we have following area where company can improve….
They have already good capacity and they are planning to add more, at the same time if they can increase the
production in the same proportion then it can do wonders for the company.
Price of the finished product is likely to be in demand & it will remain strong due to consumption factor.

16. Management & Shareholding Pattern

17. Shareholding Pattern
Particulars June-11 June-10 June-09 June-08 June-07
Promoters 67.28 66.12 64.36 64.27 64.27
Institutions 11.28 11.32 12.52 12.77 14.55
Individuals 19.16 20.22 20.55 20.41 18.54
Others 2.28 2.34 2.57 2.55 2.64
TOTAL 100% 100% 100% 100% 100%
Key Persons
1. Mr. A C Chakraborthi Chairman
2. Mr. Sushil Jhunjhunwal Managing Director
3. Mr. Ajit Jhunjhunwala Dy. Managing Director
4. Mr. G. Narayana Director
5. Mr. Arun Churiwal Director
6. Mr. Rajiv Gujral Director
 The promoters group has been increasing its stake in small percentage which clearly shows the
confidence of the futuristic projects.

18. Almost 5-6 times increase in volume during Q2FY12
 Sept’11 shareholding pattern of
public holding more than 1%
stake is very imp?
 During Q2 FY12, we have seen
huge volume at this counter.
Volume is nothing but the activities
and there is most likely some
accumulation done by smart folks.
 Our technofunda team has
observed un-usual volume at this
counter and suggested for close
watch, stock can move much
higher.
 Let us wait for shareholding patter
of Sept’11 to see who created such
volume.
 As mentioned before, company
can enhance their production by
50-60% or more by just utilizing
their current capacity without any
further addition.

19. Financial Analysis

20. Expect growth of 20% in Sales, 30% in EBITDA/PAT

21. Income Statement (Annual)
 The top line of the company has been
showing promising figure over the
years. There has been 14% CAGR
growth in sales since March 06 & will
grow at 20-22 % CAGR.
 Sales increases by 30% from FY10 to
FY11. During the same period PBDT
increased by 100% which shows
improvement in internal efficiency in
the company.
 During FY11, PAT was 9.32Cr as
compare to just 2.77Cr in FY10, an
increase of 236%.
 We project the turnover of the
company to be double from current
level in the time horizon of 3 years.
 The operating profit margin has gone
up from 16.44% to 21.22%.

22. Income Statement (Quarterly)
 The sales has gone up by 16.25% in June-
11 quarter compared to last year figure of
the same period 20.81 Cr.
 The net profit of the company has
increased by 62% due to high turnover &
economies of scale, new product offerings,
strong brand image.
 EBITDA margin has increased by 1.62%
over last year same period, showing the
efficiency of the management in carrying
the operation.
 Interest expense has gone down by 15% in
June -11 compared to last year figure in
June -10. The company has paid off its debt
which will increase the profit of the
company.
 There has been no change in equity capital
during last one year.

23. PAT growing 5-10 times faster than Sales
 A company whose top line is growing at 25% while the bottom line is growing at almost 200%
 A company decreasing its interest burden at the rate of 15-20% year on year.
 What is more important is to notice the consistency in growth numbers are maintained during last 4 quarters not only
in topline but also in bottomline.
 If the same growth rate continues, this company can deliver returns beyond expectations.

24. Balance Sheet
 There was no equity dilution during
last 4 years and most likely there will
be no equity dilution in next few
years also.
 Company had paid partly its short &
long term debt. Consequently,
interest charges will be less in
coming quarter results which will
result in more profit.
 The Balance sheet of the company is
small compared to its competitor but
the potential to grow is clearly visible
by the way management uses the
funds.
 Company holds approx 27Cr cash in
hand. It can be used further to
expand the business without any
delay.

25. Technical Analysis

26. Strong counter likely to rise further
 High volume trade during last 3 months is a clear indication that this counter is becoming active now and may rise.
 La Opala is currently trading at a PE of 9.69x FY12E and 8.09x FY13E EPS. We recommend buying on the stock in
the range of Rs80-100 with a 2-3 years holding, target price of Rs 400-600.

27. Rise in EPS & Fall in PE lead to increase in Price
 During last 4 quarters company has done very well in terms of generating consistent profits hence EPS has gone up
quarter after quarter. At the same time PE has come down because there was almost no increase in price till July
2011. Smart money is bound to observe rise in EPS or say 200% kind of growth in PAT hence get into this counter
before it is too late.

28. Investment Rationale

29. Investment Rationale
 This segment is expected to grow by 10-12% CAGR, but some of the brands are expected
to outperform – we have identified La Opala as one of them, which is expected to grow at
25-30% CAGR over next 3-5 years.
 The management of the company is not only focusing on Indian market but also targeting to
increase revenue through export. Investing in plant & machinery & other CAPEX is in line
with to capitalize on economy of scale through increasing the plant capacity.
 All the required factors for growth are available - The company brand ‘Diva’ is one of fastest
growing brand in the country; The top line and the bottom line of the company showing
outstanding growth rate.
 Effective management, robust growth history along with credit worthiness of company will
help the company to raise the capital at lower rate of interest.
 In the last few months stock is being recognized by investors & it has seen the average no of
trades going high.
 The correction in market has led to equity being available at cheaper price for informed
investors – please note that it is already at discount to fair value.

30. Concerns
 Rising cost of raw materials
 La Opala’s raw material costs have increased by 39.18% in
FY11 over FY10. It is expected to increase at a CAGR of
23.49% in the period FY11-13.
 The high cost of raw materials can to an extent be attributed
to rising lead prices used to make Crystalware.
 La Opala uses hydel power which has helped the company to
reduce its costs to a certain extent.
 Intense competition in the industry
 The company faces competition from other players in the
glassware segment in organized as well as unorganized
segment. Moreover, there is a threat from cheaper varieties
of goods imported from abroad.
 La Opala is handling increased competition by controlling
cost, relying on new technology and following an aggressive
pricing policy.
 New trends in the market
 Which will replace the demand for these table ware products
will prove fatal to the company & industry as well.

31. HBJ Capital™ Services Pvt. Ltd.
#912, 1st ‘F’ Main, Girinagar II Phase,
BSK 3rd Stage, Bangalore - 85
Contact: +91 80 65681133/34, Mob : +91 98867 36791
E-Mail: Info@hbjcapital.com | www.hbjcapital.com
Bangalore |Chennai |New Delhi |Hyderabad
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