LA OPALA RG Ltd. – Stock analysis

24 Jun 2019  Read 1024 Views

La Opala RG Ltd is an India-based pure-play tableware company promoted by Sushil Jhunjhunwala and Ajit Jhunjhunwala manufactures and markets Opal glass tableware and crystalware products in india and internationally, incorporated in the year 11-06-1987 and headquartered in Kolkata. The Company exports products to more than 40 countries. The company’s brand includes La Opala, Diva (Classique collection and ivory collection) and Solitaire.

What’s good?

La Opala RG has a strong brand image as it has been a market leader in Opal ware market for at least 25+ years catering to all segments of the society. It has a dominant share of more than 50% in India’s opal ware market.

The company also has a large distribution network, and it also has a good market penetration, as it has the first mover advantage, and they focus on contemporary designs, product mix, attractive and protective packaging helped it in gaining a higher mindshare among consumers.

La Opala has a strong product portfolio, it has a multiple brand to distinguish between the product quality and price range. Its legacy ‘La Opala’ brand is largely for entry-level products. The company markets premium products ‘Diva from La Opala’, which are further subdivided into Classique, Quadra, Ivory and Sovrana collections. La Opala RG also owns a brand called ‘Solitaire’ for its crystalware products.

Industry Analysis

  • The Tableware’s role has clearly evolved during the last decades: at first its purpose was merely functional, but currently it has become essential to the haute cuisine staging.
  • India’s tableware market is dominated by steel with 59% market share followed bybone china with 23% share. Interestingly, except for opalware 5% share.

The company primarily operates in Opalware crockery segment which isnot exposed to frequent changes. However, with growing urbanization, changinglifestyle, technological advancement, the segment has become a reflection of socio –economic background from a mere functional thing. So, the company needs to constantly launch new collection according to the growing needs andexpectations of the consumers.

Business Analysis

Nearly 25 years ago, jhunjhunwala family was enamoured by ‘Opal Glass’ on a foreign trip and in search of something innovative, the idea of opal tableware, travelled back with them to India.

As the tableware industry was changing and the life style of people was changing, they thought of manufacturing opal ware in india - an opaque, heat-resistant material made white from the addition of bone ash,such a product was not available in India. Ajit knew there was an opportunity there. He conducted market research, found it to be positive and returned to south Korea for technical partner and started manufacture opal glass in india for the first time and till date it is one of the well-established crockery brands in India. Ajit jhunjhunwala added ‘La’ because opal glass was first produced in France and we wanted to establish a French connection. The company has a wide network of dealers and retailers and a large marketing field force. It has facilities located at Sitarganj, Uttarakhand, which manufactures opalware and Madhupur, Jharkhand, which manufactures crystal ware and opal ware.It provides customers a wide range of product choice from the same company – a one-stop solution.

Management Analysis

The management has successfully scaled the business, by making constant expansion and innovations, the company targets a younger, more chic users.The management has built a really solid business over the years, the middle class that has traditionally used steel crockery has taken to La Opala well.They have modified the business model perfectly.

Valuation Analysis

  • La Opala has shown poor performance in terms of sales growth. The sales growth for last 3 years stands at a CAGR of 5.36%. However, the has improved its margin through manufacturing efficiency, optimal cost and premium product mix. Furthermore, the company’s plan on capacity expansion will further add to the Top-line.
  • The company has been maintaining healthy return ratios, the past 2 years trend shows that ROE and ROCE aredeclining, however it was due to the high cash accumulation in the books.
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Disclaimer- For informational purposes only not an Investment advise.
Author- Urvi Kotak
Disclosure- The Author has recommended the stock to the clients of finology ventures pvt. ltd.

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