Borosil Glass - Reasonable Q1-FY19, Strong Perf. In Consumer Biz.

Borosil Glass - Restg. Chg - Structurally Positive - 3:1 Bonus Issuance - Retain Buy Inv Thesis

Borosil G. - Sharp Inc in EBITDAM, Results Dragged by Solar Glass Biz. Albeit One-Offs. Retain Buy.

Value investor- India mid & small caps

Bhaskar Chakraborty

Equity Bottom-Up

<p>Analysis of <a href="https://www.smartkarma.com/entities/20139" target="_blank" data-smartkarma-citation="entities:20139:1">La Opala Rg Ltd (LOG IN)</a>'s Annual Reports of the past 4 years indicates the following-</p><ul>
<li>Revenue growth in the past benefited from (1) imposition of anti-dumping duties on Chinese imports since Aug-2011, (2) rapid increase in retail footprint till FY15 and (3) no meaningful local competition till FY15.</li>
<li>Two of the 3 levers have reversed- retail network hasn’t grown since FY16 and <a href="https://www.smartkarma.com/entities/13632" target="_blank" data-smartkarma-citation="entities:13632:1">Borosil Glass Works (BRSL IN)</a> has started offering stiff competition.</li>
<li>As a result, La Opala has been losing volume market share since FY17.</li>
<li>Revenue Cagr slowed from 24% over FY12-15 to 8% over FY15-18. The trend is unlikely to reverse.</li>
<li>Receivable days have increase sharply as both players are extending longer credit periods.</li>
<li>Company spent nothing in advertising expenditure over FY17-18. This is likely to hurt growth as Borosil has ramped up A&amp;P and is gaining market share.</li>
<li>Since 4QFY16, La Opala has doubled installed capacity that remains under-utilized owing to volume growth lower than industry. With this background, we find little sense in the company’s move to add ~50% of current installed capacity over FY19-20.</li>
</ul>

Analysis of La Opala Rg Ltd (LOG IN)'s Annual Reports of the past 4 years indicates the following-
Revenue growth in the past benefited from (1) imposition of anti-dumping duties on Chinese imports since Aug-2011, (2) rapid increase in retail footprint till FY15 and (3) no meaningful local competition till FY15.
Two of the 3 levers have reversed- retail network hasn’t grown since FY16 and Borosil Glass Works (BRSL IN) has started offering stiff competition.
As a result, La Opala has been losing volume market share since FY17.
Revenue Cagr slowed from 24% over FY12-15 to 8% over FY15-18. The trend is unlikely to reverse.
Receivable days have increase sharply as both players are extending longer credit periods.
Company spent nothing in advertising expenditure over FY17-18. This is likely to hurt growth as Borosil has ramped up A&amp;P and is gaining market share.
Since 4QFY16, La Opala has doubled installed capacity that remains under-utilized owing to volume growth lower than industry. With this background, we find little sense in the company’s move to add ~50% of current installed capacity over FY19-20.


La Opala: Annual Report Analysis Indicates Growth Challenges