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Excellent Quarter

We maintain a BUY rating on the stock and increase our target price to Rs.425 (Rs.400). The Company reported a revenue growth ahead of estimates. The demand for Opalware products is witnessing a huge spurt on the back of robust consumer sentiments and strong growth across all channels. Channel checks suggest MoM improvement in demand conditions and this is expected to continue going forward. We believe demand inflection for Opalware products is already underway as it transforms its image from a luxury to an aspiration if not a necessity. La Opala is also entering the Borosilicate glass segment, which we believe is a logical expansion (as discussed earlier- (LA Opala IC) to leverage its strong brand pedigree. We continue to believe in the Opalware segment and expect this buoyancy to continue

* Robust revenue growth- The Company reported revenue growth of 118% YoY (+187% QoQ) to Rs.922.9mn with growth across all channels. We believe demand for Opalware products is here to stay with growing acceptance from consumers. Given La Opala's pedigree, we believe the Company is well-positioned to capture additional market share. Further, with new capacity expansion revenue visibility remains strong.

* Operating margins further adds sheen to numbers- La Opala reported an EBITDA of Rs.355.2mn (+184% YoY, +273% QoQ), while OPM margins came in 38.5% (+900bps YoY, +890bps QoQ). We believe margin expansion is in line with revenue growth, despite an increase in power and fuel cost. The Company posted a PAT growth of 270% YoY (+209% QoQ) to Rs. 273.5mn. PAT growth was in line with the overall performance.

* Festive Cheer to continue- During our channel checks, we witnessed strong demand for the Opalware segment and saw MoM improvement in demand. October and the start of November have seen record sales for Opalware products. Consumer’s awareness coupled with the growing use of Microwave/Dishwashers and strong festive and weddings is likely to further boost sales for Opalware products.

* Valuation and rating:

We value La Opala on Sept.23 EPS of Rs.12.4 (Rs.11.8) leading to a target price of Rs.425 (Rs.400) an upside of 21% from current levels. Change in target price is due to an upward revision in earnings by 9.6% and 6.2% for FY23E and FY24E respectively. La Opala reported the highest-ever quarterly revenue and we expect a similar kind of buoyancy to continue going forward, with growing demand for Opalware products. Channel checks have indicated strong demand trends and we believe La Opala is well-positioned to capitalize on this. With new Opalware capacity expected to come on stream by early Q4FY22e and foray into borosilicate glass, we believe that revenue visibility remains strong

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