COLGATE PALMOLIVE (INDIA) LTD : SMILING ALL THE WAY !!!

Scrip Code: 500830 / COLPAL

CMP:  Rs. 1,893.20; Accumulate at Every Dips.
Short term Target - Rs. 2,060; Medium to Long term Target – Rs. 2,366; STOP LOSS – Rs. 1741.74; Market Cap: Rs. 25,746.16 Cr; 52 Week High/Low: Rs. 2049.00 / Rs. 1235.20.

Total Shares: 13,59,92,817 shares; Promoters : 6,93,56,336 shares – 51.00 %; Total Public holding : 6,66,36,481 shares – 49.00 %; Book Value: Rs. 44.11; Face Value: Rs. 1.00; EPS: Rs. 37.47; Dividend: 2700.00 % ; P/E: 50.52 times; Ind. P/E: 47.16; EV/EBITDA: 33.28.

Total Debt: ZERO; Enterprise Value: Rs. 25,596.88 Cr.

COLGATE PALMOLIVE (INDIA) LTD: The Company was founded on 23 September, 1937 and is based in Mumbai, India. The company is the subsidiary of Colgate Palmolive Company of USA. The company offered 11,79,000 equity shares of Rs. 10 each at a premium of Rs. 15.00 to the general public in November, 1978. Colgate-Palmolive (India) Limited provides oral care products. The company has its good Bonus history as it gave 1:1 bonus in 1982, 1:1 in 1985, 1:1 in 1987, 1:1 in 1989, 3:5 in 1991 and finally 1:1 in 1993. In November 2007, the Company in its First-of-its-Kind investor friendly move announced a Reduction of Share Capital under section 100 of Companies act of 1956. It gave back Rs. 122.40 Cr to its shareholders by reducing the face value of its equity shares from Rs. 10 to Re. 1.00 and accordingly its equity share capital came down from Rs. 135.99 Cr to Rs. 13.59 Cr. And Rs. 9 per share was paid as a ‘Deemed Dividend’ and was tax free in the hands of shareholders. The share of the Colgate Palmolive after this got relisted on BSE on December 17, 2007 at Rs. 380 per share. The company offers products that include toothpastes, toothpowder and toothbrushes under the 'Colgate' brand, as well as a specialized range of dental therapies under the banner of Colgate Oral Pharmaceuticals. The company also provides a range of personal care products under the brand name 'Palmolive'. The oral care product mix includes: Toothpastes which comprises of Colgate Dental Cream, Colgate Total 12, Colgate Kids Tooth Paste, Colgate Fresh Energy Gel, Colgate Herbal, Colgate Herbal White, and Colgate Cibaca Top. Its Tooth Brushes products comprises of Colgate Kids, Colgate Navigator Plus, and Colgate Sensitive, Colgate Extra-Clean, Colgate Super 55, Colgate Cibaca Top, Colgate Motion, Colgate Massager, Colgate Super Junior Flexible, and Colgate Super Child Flexible. Other products offered by the company include tooth powder and whitening products. Its Personal care product mix includes: Shower gel which comprises of Palmolive Aroma Shower Gel – Sensual, Palmolive Aroma Shower Gel – Relax, and Palmolive Aroma Shower Gel – Revive. It’s Bar soaps products comprise of Palmolive Aroma Soap – Revive and Palmolive Aroma Soap – Relax. Company’s Liquid hand wash products comprise of Palmolive Aroma Liquid Hand Wash – Revive and Palmolive Aroma Liquid Hand Wash – Relax. Colgate’s Talcum Powder products comprises of Palmolive Aroma Talcum Powder - Revive and Palmolive Aroma Talcum Powder – Relax. In November 2007, it acquired a 75% equity interest in Advanced Oral Care Products, Professional Oral Care Products and SS Oral Hygiene Products, the company is the fastest growing and one of the oldest companies catering to the personal care products. Colgate Palmolive (India) Ltd is locally compared with Amar Remedies Ltd, Farmax India Ltd, Gillette India Ltd, Godrej Consumer Products Ltd, Hindustan Unilever, JHS Svendgaard Laboratories Ltd, Jyothy Laboratories, Nirma Ltd, Procter & Gamble Ltd and Globally with Procter & Gamble of USA, Unilever PLC of UK, Beiersdorf AG of Germany, Reckitt Benckiser PLC of UK, Kimberly-Clark Corporation of USA, Church & Dwight Co., Inc of USA, Clorox Company of USA, Paos Holdings Berhad of Malaysia, Niitaka Co ltd of Japan.

Investment Rationale:

Colgate Palmolive (India) Limited is India’s leading provider of scientifically proven oral care products with multiple benefits at various price points. Colgate has a market share of 43.6 % in the oral care in India. India’s oral care market is estimated around $100 Cr and is expected to grow at a CAGR of about 14 % during 2011–2015, which is much higher than the global growth rate in this sector. This has led to an increase in the number of oral care companies entering the space, thereby stiffening the competition. The combined share of all the local brands, including Vicco, Ajanta, Anchor, Smyle and Baidyanath has now slipped to 2 % in calendar year of 2013 from more than 5 % from two years ago. Regional players had over 15 % share in the toothpaste market some 10 years ago. So the big marketers such as Colgate, Hindustan Unilever and the Indian player Dabur have widened their reach to almost all rural and urban markets and have slashed its entry-level prices to Rs. 5.00 and Rs. 10 which is giving a hit to local brands. Also, multinationals like Procter & Gamble (P&G) and GlaxoSmithKline (GSK) have now entered the oral-care market, increasing the competition, which is affecting small & regional players. GSK's Sensodyne has already gathered more than 2.3 % share in the Indian oral-care market. Sensodyne has crossed Rs. 100 crore in annual revenues and it leads the sensitive toothpaste category with a 27 % market share, while P&G's mass brand Oral B has garnered a market share of 0.30 % in the first six months of its launch. Companies such as Dabur having a market share of 11 % and Hindustan Unilever have doubled their rural reach over the past couple of years and have grown their market share. Market leader Colgate, too, increased its share in the toothpaste segment to 54 % last year, from 51 % in 2011. In India only 42 % of the people living in villages and small towns use tooth-paste; this proportion is expected to increase with the rising rural income and greater awareness about oral hygiene through advertisements, dental camps and free dental checkups. Colgate has done very well in this regard by building its strong distribution strength across rural India. Colgate now has the highest reach among all the consumer products companies in the country. Also, more than 30 % of India’s population suffers from gum sensitivity and oral hygiene problems. Thus, India’s urban population is continuously upgrading from regular tooth-pastes to dental creams due to which this category is growing at 30 % to 40 % annually. To carter the urban modern population, Colgate has from time to time is introducing innovative products like Colgate SlimSoft Charcoal launched recently in August 2014, which is India’s first and only toothbrush with super slim tip bristles infused with Charcoal priced at Rs. 60. Similarly it also introduced Colgate SlimSoft last year; it also launched Sugar Acid Neutraliser, Visible white Regimen. Over the years, Colgate has built an extensive oral care portfolio through constant innovation, thereby offering products across the value pyramid and within each sub-category such as sensitive toothpaste, gum care toothpaste, electric brush, kids brush, etc. It has been aggressive on extension of its premium portfolio to capture the up-trading consumers. In FY14, it launched two varieties of toothpastes like Active healthy White, Max Fresh Tea and Slim Soft Toothbrushes. Hence, with constant innovations and higher A&P spends, it is believed that Colgate would continue to remain the dominant player and be the largest beneficiary of increasing penetration levels in the country which is currently at 75 %. Colgate Palmolive also falls under FMCG category and this sector is the fourth largest in the Indian economy and has a market size of $13.1 billion. The FMCG market is all set to treble at US$ 33.4 billion by 2015. The penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. The Indian FMCG industry represents nearly 2.5 % of the country’s GDP. The industry has tripled in size in past 10 years and has grown at 17 % CAGR in the last 5 years driven by rising income levels, increasing urbanization, strong rural demand and favourable demographic trends. Food products and personal care together make up two-third of the sector’s revenues. Rural India accounts for more than 70 % of the Indian population and accounts for 50 % of the total FMCG market. With the changing lifestyle and increasing consumer demand, the Indian FMCG market is expected to cross $8,000 Cr by 2026 in towns with population of up to 10 lakh. Distribution is the most important variable in the marketing plans of most consumer goods manufacturers, because managing such a massive sales and distribution network is in itself a huge task. This sector will continue to see growth as it depends on an ever-increasing internal market for consumption, and demand for these goods remains more or less constant, irrespective of recession or inflation. Hence the growth in this sector will continue to remain robust. Colgate has done well in this regard by building strong distribution strength across rural India. Colgate now has the highest reach among all consumer products companies in the country.

Outlook and Valuations:

Colgate has been present in India for more than 76 years & has products across all orla care categories and prices points. It is one of the most popular & preferred oral hygiene brands in the coountry. It has wide range of toothpastes and toothbrushes are very well known and has strong brand recall. The Company also provides a range of personal care products under the ‘Palmolive’ brand name. Colgate has been ranked as India’s No. 1 Most Trusted Brand across all categories for four consecutive years from 2003 to 2007 and in 2011 and 2012 by Brand Equity’s Most Trusted Brand Survey. It is the only brand to be in the top three from 2001-2012. Colgate Palmolive is the largest player in the oral care segment in India with the market share as of June, 2014 of about 57 % in toothpaste and 42.6 % in toothbrush category. In spite of Procter & Gamble’s (P&G) re-entry into the toothpaste segment in India in June, 2013 with its brand Oral B, Colgate’s market share has only strengthened. Colgate has increased its market share in toothpaste from 54.7 % in June, 2012 to 57.1 % in April, 2014. Similarly, the market share in toothbrush has also increased from 38.7 % to 42.6 % for the same period. Colgate is believed to be the second largest player in the toothpaste category, HUL, is losing its market share with Dabur India inching share from 10 % to 11 % in last two years. Further, regional players like Vicco, Ajanta, Anchor, Smyle and Baidyanath have also witnessed a loss in market share in toothpastes. On performance side, Colgate Palmolive reported a 10.9 % increase in sales to Rs. 990 Cr. It reported PAT growth of 18.3 % on 2.40 % margin expansion led by 7 % volume growth in toothpaste to Rs. 130 Cr. Its EBITDA margins expanded 2.40 % as 0.90 % higher staff costs. EBITDA increased by 27.5 % to Rs. 186 Cr. Colgate’s Toothpaste volumes were up by 7 % with overall volumes up 5 %. Rural demand has been better than urban demand which declined at higher pace. Colgate’s Toothpaste market share was up 0.70 % at 56.7 % v/s 56 % in Jan‐Sep 2013. Colgate’s Toothbrush market share was up by 1.40 % YoY to 42.6 %. Colgate Palmolive’s new launches like Sugar Acid Neutraliser, Visible white Regimen and Colgate Slim soft toothbrush’s success is ensuring strong visibility. Colgate Palmolive enjoys strong Brand recall along with strong innovations in pipeline and has focused approach which ensures robust growth for the company. Company commands premium valuations due to strong brand, sustained high ROE and ROCE of more than 100 % and dividend pay-out ratio of 75 % & also there's a possibility of bonus issues by the company as it has been more the two decades from the last bonus given by the company so investors can expect bonus soon as company has enough reserves. Higher dividend payout exuberates confidence on future cash generation. At the current market price of Rs. 1,873.20, the stock is trading at a PE of 43.76 x FY15E and 36.80 x FY16E respectively. The company can post Earning per share (EPS) of Rs. 42.80 for FY15E and Rs. 50.90 for FY16E. It is expected that with the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also. One can ‘BUY’ in COLGATE PALMOLIVE INDIA LTD with a Short term target of Rs. 2,060 and my conservative  price for Medium to Long term investment is Rs. 2,366.00 but looking at the potential of the company to earn it could give Rs. 3000 + in near next 3 years time .

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	3,163.90	3,578.20	4,089.50	4,772.90
NET PROFIT (₹ Cr)	496.80	484.30	582.10	692.80
EPS (₹)	36.50	35.60	42.80	50.90
PE (x)	47.00	48.20	40.10	33.70
P/BV (x)	47.70	38.90	35.60	32.30
EV/EBITDA (x)	34.80	34.80	27.50	22.00
ROE (%)	101.46	90.00	74.70	68.85
ROCE (%)	153.28	127.54	118.44	109.85

I would buy COLGATE PALMOLIVE (INDIA) LTD for Medium to Long term for target of Rs. 2,366.00 and for the shorter term the target would be Rs. 2,060.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 1,741.74 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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RETURN ON CAPITAL

LIBERTY SHOES LTD : INVEST WITH COMFORT !!!

Scrip Code: 526596 / LIBERTSHOE

CMP:  Rs. 279.25; Buy at current levels. Short Term Target: Rs. 305; Medium to Long Term Target: Rs. 400; STOP LOSS – Rs. 256.90; Market Cap: Rs. 475.67 Cr; 52 Week High/Low: Rs. 351.15 / Rs. 86.25.

Total Shares: 1,70,40,000 shares; Promoters : 1,10,62,507 shares – 64.92 %; Total Public holding : 59,77,493 shares – 35.07 %; Book Value: Rs. 80.73; Face Value: Rs. 10.00; EPS: Rs. 7.85; Dividend: 15.00 %; P/E: 35.56 times; Ind. P/E: 35.36; EV/EBITDA: 14.14.

Total Debt: Rs. 109.99 Cr; Enterprise Value: Rs. 578.51 Cr.

LIBERTY SHOES LIMITED: Liberty Shoes Ltd was founded in 1954 and is based in Karnal, Haryana, India. Liberty Shoes Limited is engaged in manufacturing and retailing of footwear and accessories through its retail outlets and wholesale networks in India and internationally. It provides school shoes, sports sneakers, ballerinas, adventure shoes, corporate formal shoes, and relaxed slip-ons. The Company came with an IPO in 1992 with a premium of Rs. 99.00 of face value Rs. 10 at Rs. 109 per share. The company gave bonus shares in October 2005 in the ratio of 1:1. Liberty Shoes Ltd manufactures and sells leather footwear in India and internationally & has worldwide distribution network of 150 distributors, 400 exclusive showrooms and more than 6,000 multi-brand outlets. The company offers its products for men, women, boys, and girls under their brands like Coolers, Footfun, Force 10, Fortune, Gliders, Prefect, Senorita, TipTopp, Warrior, and Windsor. Liberty Shoes Limited markets its products through distributors, exclusive showrooms and multi brand outlets, as well as on online portal. The company has its presence in more than 25 countries, which includes major international fashion destinations like France, Italy and Germany. Liberty Shoes Ltd is locally compared with Bata India Ltd, Mirza International Ltd, Sarup Industries Ltd, Superhouse Ltd, Relaxo Footwares Ltd and globally compared with American Apparel Inc of USA, Carters Inc of USA, Columbia Sportsware Co of USA, Nike Inc of USA, PUMA SE of USA, Arab Cotton Ginning of UAE, Delta Galil Ind of UAE, Malek Spinning Mills Ltd of UAE, Squre Textiles Ltd of UAE, Adidas AG of Europe, LVMH-Moet Vuitton of Europe.

Investment Rationale:

Liberty Shoes Ltd engages in manufacturing and sale of leather footwear in India and internationally. The company’s products for men include unisex sandals and slip-ons; formal footwear; sportswear; and beachwear, casual, and formal footwear in leather and non-leather material. It also offers heels and strappy styles in slip-ons, sandals, and belles for women; sandals, sports shoes, lycra uppers with no laces, and school shoes for kids; and safety footwear & Foot gears for the workforce at construction sites, engineering sites, oil refineries, and healthcare sectors, as well as variety of formal shoes for company executives. In addition, the company provides anti-static, anti-slippage, and non-tearable protective boots as resistant to electrical shock, mechanical crush, chemical corrosion, and heat and cold for electrical, thermal, chemical, and slippage risking professionals, power plant technicians, alkali unit workers, and sports practitioners. India is the world's second largest footwear producing country in the world after China. The per capita footwear consumption in India has gone up from 1.4 pairs per year in 2004 to 2.5 pairs per year in 2013 & it is still much below the average per capita footwear consumption of 5 pairs per year in developed countries. The size of Indian footwear market is around Rs. 26,300 Cr and is expected to reach to around Rs. 38,700 Cr with a CAGR of 15 % by 2015. At present, Men's footware contributes around 60 % of footwear market as against Women's footware share of 30 %. Men's footware market is growing at a CAGR of 10 % & Women's footware market is growing at a much faster CAGR of 20 %. India controls around 15 % of annual global footwear production. Indian footwear retail is mainly unorganized market with around 60 % of market share. The size of the organised sector which was around Rs. 7,500 Cr in 2010 increased to Rs. 10,000 Cr in 2011, posting a growth at a CAGR of 30 % every year since 2008. The market is expected to reach Rs. 17,500 Cr by 2015 growing at a CAGR of 19 % p.a. Nearly 90 % of India's export of footwear goes to European Countries and the USA. The European countries and the USA are major consumers for the Indian footwear. India produces more of gents' footwear while the world's major production is women's footwear. The future growth of the footwear industry in India will continue to be market-driven and oriented towards EU and US markets. With technology and quality of the footwear improving year after year, Indian Footwear industry is poised for a global revolution worldwide. Liberty has increased its presence across the globe with a primary focus on the African market and will also look into increasing its foothold in the existing markets. And with growing foot ware markets Liberty will surely be among the ones to get benefited.

Outlook and Valuation:

Liberty Shoes Ltd is the second largest foot ware manufacturer in India after BATA. It offers its products under the brand names: Diva, Coolers, Fortune, Force 10, Gliders, Windsor, Senorita, Tiptopp, Footfun, Prefect, Warrior, Freedom, and Workman brand names. The company markets its products through distributors, exclusive showrooms, and multi-brand outlets. The company is amongst the top 5 manufacturers of leather footwear of the world producing more than 50,000 pairs a day using a capacity of more than 3 lakh square feet of leather per month. The company has its presence in more than 25 countries, which includes major international fashion destinations like France Italy and Germany, is its worldwide distribution network of 150 distributors, 400 exclusive showrooms and more than 6000 multi-brand outlets. Two years back Liberty decided to go for the franchisee retail model in order to tap on the local market knowledge of the franchisee and use that as a base for strengthening and broadening its retail network. Its model had ROI of 25 % with breakeven period of One year. Today Liberty has around 400 exclusive franchisee showrooms in large, medium and small cities including 15 cities of Middle East. Liberty has emerged as one of the most successful Indian franchisee chains of the current times. Liberty was recently recognised developing the best business model for franchising across industries in the country as well as for demonstrating excellence through the successful operation of satisfied franchisees over a sustained period. On Financial side, Liberty Shoes Ltd reported streamlined Q2FY15E results. The company has restated previous year figures to include Liberty Retail Revolutions Ltd, the recently merged retail subsidiary. It reported Net sales which were lower by 2.8 % at Rs. 143.8 Cr. Domestic sales grew 35.3 % yoy to Rs. 134.3 Cr in Q2FY15 and exports grew 14.7 % yoy to reach Rs. 15.74 Cr. The company has mentioned that it has completed major portion of the institutional order of Rs. 48 Cr which was missed last quarter. The balance order would be completed by Q3FY15E. During the quarter, the company added 16 new exclusive stores in Company Owned & Company Operated (COCO) & franchise format. Sales in own stores grew by 20 % yoy to Rs. 20 Cr in Q2FY15 against Rs. 17.3 Cr in Q2FY14. The company plans to add 80 to 100 more exclusive stores in franchise and COCO format in FY15E. As company has higher proportion of low margin institutional orders led pressure on operating margins. EBITDA margin stood at 6 % in Q2FY15 against 7.5 % in Q2FY14, contraction of 1.53 % bps. EBITDA of the company grew by 5.1 % yoy to Rs. 8.6 Cr in Q2FY15 from Rs 8.2 Cr in Q2FY14. Liberty’s Adj. PAT stood at Rs. 2.70 Cr in Q2FY15 against Rs. 2.00 Cr in Q2FY14, an increase of 34.7 % yoy. Liberty On half yearly basis, the net sales grew by 10.7 % yoy to Rs. 245.4 Cr in H1FY15 from Rs. 221.6 Cr in H1FY14. Domestic sales grew 9.6 % yoy to Rs. 229.1 Cr in H1FY15 from Rs. 209.10 Cr in H1FY14. Exports stood at Rs. 27.2 Cr in H1FY15 against Rs. 20.70 Cr in H1FY14, implying growth of 31.7 % yoy. Adj. PAT stood at Rs. 6 Cr in H1FY15 against Rs. 5.3 Cr in H1FY14, growth of 13.6 %. PAT growth was higher than EBITDA growth due to higher other income and decline in interest cost. At the current market price of Rs. 279.25, the stock P/E ratio is at 28.20 x FY15E and 16.62 x FY16E respectively. Earnings per share (EPS) of the company for FY15E and FY16E are seen at Rs. 9.90 and Rs. 16.80 respectively. One can ‘BUY’ in this particular scrip with a target price of Rs. 305.00 for Short term and for the Medium to Long term investment it could be Rs. 400.

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	362.90	483.50	580.80	741.00
NET PROFIT (₹ Cr)	5.80	13.40	16.80	28.60
EPS (₹)	3.40	7.90	9.90	16.80
PE (x)	92.70	40.10	31.90	18.80
P/BV (x)	3.90	3.90	3.50	3.00
EV/EBITDA (x)	20.10	14.80	12.00	9.30
ROE (%)	4.00	9.60	11.60	17.40
ROCE (%)	8.20	11.90	13.80	17.50

I would buy LIBERTY SHOES LTD for Medium to Long term for target of Rs. 400.00 and for the Shorter term the target would be Rs. 305.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 256.90 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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RETURN ON CAPITAL

LA OPALA RG LTD: BEST IN TABLEWARE !!!

Scrip Code: 526947 / LAOPALA

CMP:  Rs. 350.70; Buy at current levels.

Short Term Target: Rs. 404.00; Medium to Long Term Target: Rs. 600; STOP LOSS – Rs. 322.64; Market Cap: Rs. 1,946.38 Cr; 52 Week High/Low: Rs. 376.70 / Rs. 89.60. Total Shares: 5,55,00,000 shares; Promoters : 1,07,77,700 shares – 19.41 %; Total Public holding : 1,68,77,460 shares – 31.85 %; Book Value: Rs. 19.61; Face Value: Rs. 2.00; EPS: Rs. 5.95; Dividend: 50.00 %; P/E: 26.53 times; Ind. P/E: 58.94; EV/EBITDA: 36.39.

Total Debt: Rs. 14.18 Cr; Enterprise Value: Rs. 1,951.44 Cr.

LA OPALA RG LIMITED: La Opala RG Limited was founded in 1987 and is headquartered in Kolkata, India. La Opala RG Limited manufactures, sells, and exports lifestyle products in India and internationally. The company offers opal glass tableware products, such as plates, bowls, dinner sets, cup-saucer sets, coffee mugs, coffee cups, tea sets, soup sets, pudding, and dessert sets; and crystal-ware products comprising barware, vases, bowls, and stemware. It provides its products under La Opala, Diva, and Solitaire brands. The company had declared splits in face value of its shares from Rs. 10 to Rs. 2 in May 2014 and gave bonus of 1:1 in March 1994 and again 1:1 bonus in August 2006. Company manufacture’s glass and glassware products like plates, bowls, dinner sets, cup-saucer sets, coffee mugs, coffee cups, tea sets, soup sets, pudding and dessert sets; its crystal ware products comprises of barware, vases, bowls and stemware. Company’s brands include LaOpala, Diva, and Solitaire. The company’s manufacturing facilities are in Madhupur (Jharkhand) and Sitarganj (Uttarakhand). In 1999, Radha Glass and La Opala merged to become La Opala RG Limited. The Company is one of the largest organised crockery players in India with an installed capacity 13,000 MT TPA as on 31 March 2014. LaOpala, currently exports its brands to more than 40 countries which includes US, UK, Singapore, South Korea, Australia, New Zealand and Spain as well as the Middle East, Africa, Latin America and the ASEAN region. La Opala Rg Ltd is locally compared with Asahi India, Hindustan National Glass Ltd, Borosil Glass, Saint-Gobain Ltd, Gujarat Borosil, Haldyn Glass, Nile Ltd, Swiss Glascoat, Sezal Glass, Triveni Glass, FGP Ltd, Jai Mata Glass and globally compared with Industrial Glass & Mirror Inc of USA, Bassett Furniture Inds of Virginia, Beazer Homes Usa Inc of USA, Cavco Industries Inc of USA.

Investment Rationale:

La Opala RG Limited is the largest glassware manufacturer in India. The Company is engaged in manufacturing and marketing of opal glass tableware and crystal-ware products within and outside India. In 1999, Radha Glass and La Opala got merged and become La Opala RG Limited. The company mainly manufactures glass and glass products of all types and exports its 85 % of crystal ware around the world. La Opala RG Ltd has a network of 125 distributors with 10,000 dealers across country and the number is increasing at the rate of 15 per cent annually. Company also exports 10 % of its opal ware production to 20 countries. La Opala has a grand 70 years of experience & has a strong presence in the national glass industry in India. La Opala products are widely distributed in all major towns of the country through a network of distributors and sales representatives covering all states of India. There are about 10,000 retail touch points through which the products of La Opala are sold. La Opala deals in Opal-ware and Crystal-ware products and has a strong product portfolio that spans over 100 products. La Opala is one of the established brands in the country. The company has brands that cater to all the sections of the society. For example, ‘Diva’ is the high end brand of the company and contributes around 40 % to the company’s turnover. Apart from ‘Diva’, the company has brands like ‘Crystal’ which caters to the upper segment and ‘La Opala’ which is targeted towards the mass market. As per IMF estimates on January 2014, global GDP growth was estimated at 3 % in 2013 vis-à-vis 3.1 % in 2012. The year under review was marked by a variance in growth and financial market conditions. Indian economy slackened in 2012-13 but buoyed by good performance from the farming sector & the economic growth in the current fiscal is now estimated to rise to 5.5 percent as compared to the growth rate of 4.5 percent in 2012-13. The recovery in growth, although weak, was on the back of abundant rainfall which not only boosted agricultural output but also the overall expansion. Nonetheless, this growth rate remains below its potential as the manufacturing and the mining sectors continues to remain a cause of concern in the ongoing fiscal. Supported by slightly stronger global growth, improving export competitiveness and implementation of recently approved investment projects, India’s growth is expected to get better over the medium-term. Over the last decade, there was a significant growth in rural incomes – an average annual median per capita income increase of 7.2 % – inspiring a shift in lifestyles from traditional bone china crockery to modern alternatives. This is expected to plug the extensive crockery-ware which is currently under-penetrated with just 24 % within India’s total dinner set market. India is possibly the largest relatively under-explored tableware market in the world. The product category targets individuals with aspirational lifestyles who are increasingly receptive to branding. There is a visible transition from conventional crockery to modern equivalents on the one hand and the use of unbranded to branded products on the other. The use of opal glassware products has gone a transition - from special occasions in the past to everyday use today. The opal glassware product is considered more durable compared to its bone china equivalent. The opal glassware product is completely hygienic and vegan, an advantage over its bone china competition that contains animal matter. There has been a steady growth in urbanisation and nuclear families, catalysing tableware consumption. The entry of international brands is helping widen the opal glassware market and enhance category visibility. The Company have consistently retained its position as one of the largest organised crockery players in India with an installed capacity 13,000 MT TPA as on 31 March 2014.

Outlook and Valuation:

La Opala RG Ltd (La Opala) promoted by Mr. Sushil Jhunjhunwala and Mr. Ajit Jhunjhunwala, is engaged in manufacturing of Opalware and Crystalware products. La Opala started manufacturing Crystalware in March 1999, sourcing the exclusive right to use the technical know-how, information, data for the manufacture and sale of Crystalware in India and abroad from Doosan Glass of South Korea, a leading manufacturer of Crystalware globally. Headquartered in Kolkata, La Opala has manufacturing units in Madhupur (Jharkhand) and Sitarganj (Uttarakhand). The company has been listed, out of 19 Indian companies, in the Top 200 Asian companies in Forbes Asia's Best under a Billion (BUB) list, from a pool of 15,000 stock traded companies in Asia Pacific with revenues between $5 million and $1 billion. La Opala has successfully increased its capacity in Uttarakhand by 4000 MT which takes the total capacity of the company to 12,580 MT. This expansion was completed in July 2012 and has entailed a capex of Rs. 23 crores. LaOpala has also modernized its plant at Madhupur with an estimated capex of Rs. 12 crores. This will help to ensure superior quality of products and reduction in costs. Company has well-known Brands like La Opala and Crystal and Diva which has their own recognitions. Its products are not only White in colour but are also microwave safe and Chip resistant. Their products matches are the best across the globe. Company’s Classique Collection, comprises of an elegant range of tableware that stands out for its striking milky white glaze and consumer-friendly properties. Its exquisitely chic international designs are very much in demand. Its Ivory Collection is inspired and is well adorned on the walls and plates of kings and nawabs. Its soft milky glaze, its smooth texture has been adored through the centuries. Diva brings you a collection as refined as ivory designed by leading Indian fashion designer, Manish Malhotra. Adding to Diva a one-of-a-kind, haute couture collection meant to be collectibles for connoisseurs of high taste and the uber-chic. Solitaire Crystal is handcrafted to protection as per global standards in aesthetic and design. Every cut and every sparkle redefines the spheres of clarity. Renowed Globally, it makes a prominent presence of India in the entire world market of Crystals. Crockery has by far become an integral part of every dining room not only because of its utility but also it can lend grandeur even to a humble little dwelling. The role of dining room has changed from merely being a place to dine in to one of stately proportions. Crockery adds grace and class to the decor of the dining room giving it a royal ambience. In the Indian milieu, one can hardly find a modern household without at least one set of crockery proudly exhibited in a rather strategic spot on the mantle or showcase another set for daily use. Crockery enhances the positive mood and vibes, soothing the mind of the guest and the host alike. The demand for crockery in India has undergone dramatic change. Crockery is no longer used only as a serve ware but as a lifestyle product. With the changing lifestyle and attitude of people, the design of crockery has undergone sea change. A transition from Stainless Steel to Glass wares has been observed. With cultural diversity and varied lifestyles in India, crockery market is one of the most vibrant market segments. A highly fragmented market, crockery has been one of the fastest growing segments over the past few years paving the way for new market players to enter the industry. Customers prefer to buy branded crockery (mainly low-priced) rather than unbranded crockery. As the prices of La Opala RG’s (LORL) crockery are close to the prices of unbranded crockery, there is a shift in customers’ preference towards LORL products. LOPALA RG is looking at product extension and plans to sell products like water glasses, juice glasses, and Wine glasses and also bake and serve products. It will outsource the manufacture of these products and leverage on brand equity of La Opala apart from its distribution reach. This will significantly improve revenue and RoCE of LaOpala. Currently, the company caters to four different price segments - La Opala catering to the economic segment, Diva Classic, Diva Ivory and Diva Designer Collection catering to basic, medium and premium segments, respectively. Diva Classic enjoys a 35 % premium to La Opala, Diva Ivory enjoys around 15 % premium to Diva Classic and Diva Designer Collection enjoys a premium of 15 % to Diva Ivory. Institutional orders account for 4 %-5 % of LORL’s revenue. The addressable market for la Opala is Rs. 7,000 to Rs. 8,000 Cr and right now only Rs. 1,000 Cr is what it addresses of which 50 % is organised. So the organised market that La Opala Rg caters is Rs. 500 Cr of which its topline is about Rs. 150 to 200 Cr. So the scale of expanding across India as it grows its product range is tremendous. On financial side, La Opala RG Ltd achieved a turnover of Rs. 41.91 Cr for the 1st quarter of the current year 2014-15 as against Rs. 32.17 Cr in the corresponding quarter of the previous year. The company has reported an EBITDA of Rs. 11.00 Cr an increased by 30.36 % y-o-y as against prior period of last year. In Q1 FY15, net profit jumps up by 35.81 % y-o-y of Rs. 6.11 Cr against Rs. 4.50 Cr in the corresponding quarter of the previous year. The principal risks in the sector comprise increased competition, cheaper imports, volatile fuel costs and change in government policies affecting the sector, brand weakness and stiff competition from the unorganised sector. Net Sales and PAT of the company are expected to grow at a CAGR of 18 % and 23 % over 2013 to 2016E respectively. It is expected that the company surplus scenario is likely to continue for the next three years, & will keep its growth story in the coming quarters also. At the current market price of Rs. 350.70, the stock P/E ratio is at 51.42 x FY15E and 43.72 x FY16E respectively. Company can post Earning per share (EPS) of Rs. 6.82 for FY15E and Rs. 8.02. One can buy this stock with a Short Term target of Rs. 404 and Rs. 600.00 for Medium to Long term investment. 

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	153.91	177.85	213.43	251.84
NET PROFIT (₹ Cr)	22.87	29.95	36.17	42.52
EPS (₹)	21.59	5.65	6.82	8.02
PE (x)	60.45	46.17	38.23	32.52
P/BV (x)	18.67	14.14	11.08	8.82
EV/EBITDA (x)	33.13	27.19	22.73	19.29
ROE (%)	30.89	30.62	28.97	27.11
ROCE (%)	48.77	51.84	48.30	45.11

I would buy LA OPALA RG LTD for Medium to Long term for target of Rs. 600.00 and for the shorter term the target would be Rs. 404.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 322.64 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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MAYUR UNIQUOTERS LTD : DIWALI 2014 MUHURAT PICK !!!

Scrip Code: 522249 / MAYURUNIQ

CMP:  Rs. 418.80; Buy at current levels and at every dipps. Medium to Long Term Target: Rs. 600 and can go to Rs. 800 in two years time; STOP LOSS – Rs. 385.30; Market Cap: Rs. 1,813.39 Cr; 52 Week High/Low: Rs. 485.00 / Rs. 125.00. Total Shares: 4,33,05,600 shares; Promoters : 3,06,61,904 shares –70.80 %; Total Public holding : 1,26,43,696 shares – 29.19 %; Book Value: Rs. 27.36; Face Value: Rs. 5.00; EPS: Rs. 13.92; Dividend: 95.00 %; P/E: 30.56 times; Ind. P/E: 30.08; EV/EBITDA: 18.40.

Total Debt: Rs. 21.00 Cr; Enterprise Value: Rs. 1,828.84 Cr.

MAYUR UNIQUOTERS LIMITED: Mayur Uniquoters Limited was founded in 1992 and is based in Jaipur, India. Mayur Uniquoters Limited manufactures and sells coated textile fabrics in India. The company’s products include artificial leather, synthetic leather, and PVC vinyl. Its products are used in footwear, furnishings, automotive OEM, automotive replacement, and automotive exports markets. The company sells products directly to OEMs, as well as to other manufacturers and wholesalers. It also exports its products to the Middle East, Cyprus, the United Kingdom, Russia, Sri Lanka, Nepal, the United Arab Emirates, Mexico, Italy, and the United States. The company had declared splits in face value of its shares from Rs. 10 to Rs. 5 in July 2013 and gave bonus of 1:1 in June 2012 and again 1:1 bonus in February 2014. Mayur Uniquoters Ltd has an installed capacity of 400,000 Linear Meters per month & it has a full range of machinery to full-fill Printing, Embossing, Lacquering, Sue ding and laminating needs. The company possesses fully equipped Physical, Chemical and Product Development Laboratories capable of testing nearly all the properties of Artificial Leather for different segments and applications. Company also manufactures and exports PVC Vinyl also referred to as Artificial Leather or Synthetic Leather; they are also termed as PVC Leather Cloth, PU/PVC Leather Cloth. The company has its own inline testing lab, physical testing lab, raw material testing lab, Colour testing lab and product development lab. Company carters to major automobile brands in India to name the few are BMW, General Motors, Daimler, Maruti Suzuki, Tata Motors, Honda, Ford, Hyundai, Nissan, LML. Mayur Uniquoters Ltd is locally compared with Superhouse Ltd, Lawreshwar Polymers Ltd, Super Tannery ltd, Super House Ltd, Crew BOS products Ltd, Mideast India Ltd, Mirza International Ltd, Fenoplast ltd, Zenith Exports Ltd, Mayur Leather Products Ltd, Relaxo Footware ltd globally compared with Daiichi Kasei Company Ltd of Japan, Chanco International Group Ltd of Hong Kong.

Investment Rationale:

Mayur Uniquoters Ltd is the largest manufacturer of artificial leather and PVC Vinyl in India and was established by Mr. Poddar in 1994. Mayur Uniquoters is a market leader with installed capacity of 2.5 million linear meters per month. The company is operating at 100 % capacity utilisation, and has planned to expand its capacity further to 3.05 million linear meters per month by 2015. Company’s nearest competitor is just 50 % of the company’s current capacity. The company derives more than 50 % of its revenues through organised footwear industry and some of its prestigious clients include all top names such as Bata, Action, Liberty, Relaxo, etc. and the Automobile industry contributes 35 % of revenue and some of its prestigious clients include all top names such as BMW, General Motors, Daimler, Maruti Suzuki, Tata Motors, Honda, Ford, Hyundai, Nissan, LML. This list further indicates the consistent superior quality provided by Mayur Uniquoters. On the export front, the company has managed to get entry into Ford Motors and Chrysler. In addition, orders from clients like GM, Mercedes and BMW are also in the pipeline. Due to inherent negatives of natural leather such as being derived from animal sources, tanneries causing pollution and most importantly due to its high cost, Synthetic Leather has become a better economical alternate to natural leather and Mayur Uniquoters sees an increasing trend of replacing natural leather with synthetic leather in various industries. As per the management of Mayur Uniquoters Ltd, the addressable market size is in the range of Rs. 4,000- Rs. 5,000 crores. The Indian textile industry is one of the major sectors of Indian economy largely contributing towards the growth of the country’s industrial sector. The textile sector contributes 14 % to industrial production, 4 % to National GDP, and 10.63 % to country’s export earnings. Textile sector in India provides direct employment to over 35 million people and holds the second position after the agriculture sector in providing employment. Growing at a rapid pace, the Indian Market is being flocked by foreign investors exploring investment purposes and with an increasing trend in the demand for textile products in the country, a number of new companies and joint ventures are being set up in the country to capture new opportunities in the market The most significant change in the Indian textile industry has been the advent of man-made fibres (MMF). The country has successfully placed its innovative range of Man Made Fibres textiles in almost all the countries across the globe. Lower realisations and margins in the domestic market have prompted Mayur Uniquoters to shift focus towards exports and replacement markets. Mayur Uniquoters has successfully acquired clientele in the global Auto OEM markets such as Ford (USA) and Chrysler (USA). The company is expecting to supply to other global OEM players such as BMW, Mercedes and GM. In future, the company can insulate itself from any recessionary trends in the auto industry by targeting the replacement market. Supplying to the dealers of the aftermarket segment of USA is also under consideration. Indian synthetic leather manufacturers supply mainly to the Footwear industry and to the Automotive OEMs. The market size of synthetic leather industry in India is estimated to be Rs. 4500 crores. The unorganised sector accounts for 50 % of this market, whereas the remaining 50 % is serviced by the organised sector which comprises 10-15 players including 5-6 big players. These organized players include Jasch Industries, Fenoplast, Manish Vinyl, V.K. Polycoats, HR Polycoats and Polynova Industries, among others. Synthetic leather is also used to make accessories such as bags, home furnishings etc. Synthetic leather has found acceptance in the western markets which have been traditionally natural leather markets. As cost efficiency gains importance in the global auto markets, synthetic leather, which is 4-5 times cheaper than natural leather, has become a preferred choice for Auto OEMs. Apart from the cost differential, synthetic leather has found favour over natural leather due to a variety of reasons such as reduced pollution, animal cruelty concerns etc usually associated with leather tanning. The market size of India's synthetic leather industry is expected to double in the next five years to Rs. 9,000 crore on account of improved technology, improved product quality, increasing consumption and purchasing power.

Outlook and Valuation: 

Mayur Uniquoters Limited manufactures and sells coated textile fabrics in India. The company’s products include artificial leather, synthetic leather, and PVC vinyl. Its products are used in footwear, furnishings, automotive OEM, automotive replacement, and automotive exports markets. The company sells products directly to OEMs, as well as to other manufacturers and wholesalers. The company is in the process of installing a 5th coating line, which will be dedicated mainly to the exports market. This will take the coating line production from 1.85 mn linear meters per month to 2.5 mn linear meters per month. In addition, the company is planning to increase this capacity to 3.1 mn linear meters per month going forward. The capacity addition will lead to increase in volume and the export focus will lead to margin expansion. In addition, the company is doing backward integration in manufacturing synthetic knitted fabric, a key raw material post chemicals with investment of Rs. 25 crores. This will lead to quality control and reduce rejection which will also help in margin expansion. Company has its Economic Moat (A competitive advantage that one company has over the other companies in the same industry – by Warren Buffett) expanding moats which is a very strong sign of a future Multi-bagger stock. Footwear segment contributes 54 % to Mayur Uniquoters Ltd’s total revenues on the back of big clientele. The company’s clientele include Bata, Paragon, Liberty, Action, VKC group and Relaxo. The current market size of Indian footwear industry is estimated at Rs. 30,000 Cr to Rs. 35,000 Cr. The industry witnessed a CAGR of 18 % over FY08-12, which in turn led to growth in Mayur Uniquoters Ltd’s footwear segment. India’s average per capita footwear consumption is at 2.5 footwear pair’s p.a, which is much lower than the average per capita consumption of 5.0 pair’s in the developed countries. Thus, there is scope for improvement, which in turn offers big opportunity for players such as Mayur Uniquoters Ltd to cater to this growing market. The Auto OEM segment is the second largest segment for Mayur Uniquoters Ltd. This segment contributes 35 % to the company’s total revenues. Mayur Uniquoters Ltd caters to both domestic as well as global OEMs and replacement markets. OEM exports realisations can be as high as US$ 7 to $ 9 per metre (Rs. 427 to Rs. 550 per metre) over domestic OEM realisation of Rs. 120-135 per metre. The realisation from sale to Global OEMs with Indian presence stands at Rs. 200 per metre. Synthetic leather is produced by a process known as calendaring where PVC sheet and two distinct layers of knitted fabrics are fused together. Mayur commands 7 % to 8 % market share in Indian PVC market and has steadily increased its exposure to big Auto OEM players. Mayur Uniquoters has already received approvals and featured in the supplier list of Auto OEMs such as Ford India, GM India & Mahindra SUV500 etc. It is also part of the approval list of suppliers to Ford Worldwide along with Chrysler (USA). Mayur intends to expand its presence in the global market as a key synthetic leather supplier. Mayur Uniquoters Ltd has achieved backward integration linkage by investing Rs. 25 crores in a unit producing knitted fabrics. This could bring down the raw material costs by 5-10 % and in turn improve margins. By controlling the quality of raw material, the company would also target a lower rejection rate, thus improving quality. Also, this backward integration would significantly reduce the product development cycle from 2-3 months to 3-4 weeks. The company has consistently improved its realisation per meter from Rs. 188 per meter in FY11 to Rs. 225 per meter in FY13. The growth in high margin exports business and the backward integration in manufacturing knitted fabric will lead to further improvement in margins. The comapny has been reporting strong return ratios for the last 4 years with ROE in excess of 40 %. Due to strong cost control and better working capital management, the debt equity ratio is negligible. There has also been consistency in dividend payout. On Financial side, Mayur Uniquoters Ltd.’s has consistently grown over the last decade. Its Sales are expected to grow at a CAGR of 23 % over FY13-FY16E. The company has revenue growth of 24 % CAGR over FY11-FY13.  It is expected that Mayur Uniquoters to continue recording such a strong revenue growth going ahead with its renewed focus on the Auto OEM segment and its emphasis on an exports led revenue growth. EBITDA is expected to record a growth of 17 % CAGR over FY13-16E. Company’s PAT grew at a CAGR of 31 % over FY11 to FY13 and is expected to grow at a healthy rate. Mayur Uniquoters offers a superior ROCE and ROE. It has reported an average of 61 % of RoCE since FY11 and will continue to generate healthy ROE, making it an attractive business to look at. Going forward, it is expected that the quality of ROE to remain in excess of 30 % with stable operating margins and minimal addition in leverage. Company will witness strong operating cash flows with no incremental capex; the Debt to Equity ratio is expected to be reduced further and company’s Operating cash flows are expected to remain strong on the back of robust sales and efficient working capital management. At the current market price of Rs. 418.80, the stock P/E ratio is at 13.29 x FY15E and 11.16 x FY16E respectively. Company can post Earning per share (EPS) of Rs. 31.50 for FY15E and Rs. 37.50. One can buy this stock with a target price of Rs. 600.00 for Medium to Long term investment. 

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	381.00	487.00	600.00	709.00
NET PROFIT (₹ Cr)	44.00	54.00	68.00	81.00
EPS (₹)	20.10	25.00	31.50	37.50
PE (x)	48.20	19.40	15.40	12.90
P/BV (x)	8.90	6.60	5.00	3.80
EV/EBITDA (x)	15.40	12.20	9.40	7.70
ROE (%)	42.70	39.10	36.80	33.30
ROCE (%)	55.60	48.20	45.80	42.70

I would buy MAYUR UNIQUOTERS LTD for Medium to Long term for target of Rs. 600.00 and stock can see Rs. 800 and for the shorter term the target would be Rs. 500.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of ₹ 385.30 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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