Hold La Opala RG; target of Rs 550: Centrum Research

November 17
01:41 2017

Centrum’s research report on La Opala RG

We downgrade the stock to Hold with TP of Rs550 (earlier TP Rs555) as we value the company on our conservative Adj. OCF/EV yield based methodology. While the revenue growth has bounced back in the quarter on the back of re-stocking and healthy festive season demand along with margin expansion, competitive intensity continues to remain high. Our channel check suggests that both Borosil and Cello have launched new designs in the market and continue to offer higher trade margins. Uncertainty regarding use of cash on books while valuations at 41x/31x FY18E/FY19E offer limited upside.

We downgrade our rating to Hold with a TP of Rs550 as valuations remain stretched. We value the company on adjusted OCF to EV yield based on five year average cash flows. Key downside risks could be increasing competitive intensity.

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