La Opala - 3QFY13 Results - Nirmal Bang

La Opala is a name to reckon with in the Indian organized crockery market and an undisputed leader in premium segment. We feel that with the strong performance from the past couple of quarters where the company has reported Revenue of Rs. 112.1 crore in 9MFY13, up by 35.4% YoY and PAT of Rs. 16.5 crore 9MFY13 up by 75.7% YoY, we expect that the company will close strong FY13.

La Opala has reported an EPS of Rs. 15.61 in 9MFY13 and we expect it to end FY13 with an EPS of Rs. 20+. Further our rough estimate suggests company can report EPS of Rs. 25 in FY14.

At current price the valuation looks attractive considering its operation in premium house wares segment with established brand and showing steady growth. There is no strictly comparable peer but the demand trend of these products is almost similar to the products offered by companies like TTK Prestige, Hawkins etc.

The company enjoys a strong return ratios of 22.6% ROCE and 24.9% ROE for FY12 which depicts the company's strong inherit growth potential. Except for FY09, the company has been a consistent dividend payer, typically offering 20% of its profits as dividends.

The promoter group has a high shareholding of 67.7%. With comfortable debt-equity and other healthy ratios added up with the niche business model, we feel that the stock has the potential to outperform in the present segment. Given its track record and sound financials, the company should attract higher PE multiples in the coming quarters. Thus, we advise investors to BUY the stock at current levels and on decline with 15-20% expected return in near term.

Source : Equity Bulls

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