1. La Opala RG LimitedWitnessing a stupendous success in Glass Industry in France, La Opala RG Ltd, forayed its operation inIndian market in 1988 with the corporate mantra of Adding Style To Your Lifestyle. Today it touchesover millions peoples life through its beautiful products. The Jhunjhunwala led company went for IPO in1995. The company has the rich experience of over 70+ years in the industry. The company is movingtowards high growth period & is bound to grow rapidly in years to come. Business Insight stock for the month of Sep 2011HBJ Capital, IndiaWeb: www.hbjcapital.comE-Mail: info@hbjcapital.comCall: +91 98867 36791

2. Systematic buying between INR 80 to 1002 Phase Buying Strategies Suggested [Always buy in SIP ways]1st Phase: Buy at the current price range Rs 100-110 [50% of investment]2nd Phase: Add if the price falls down to Rs75-80 [50% of investment]>>>Expect at least 4-6 times returns in next 2-3 years time frame!!! 3. Table of Contents 1. From the Desk of CEO, HBJ Capital (Page 4 ) 2. The Indian Table Ware Industry (Page 6) 3. La Opala RG Ltd. (Page 10) 4. Management & Shareholding Pattern (Page 16) 5. Financial Analysis (Page 19) 6. Technical Analysis (Page 25) 7. Investment Rationale (Page 28) 4. From the desk of CEO, HBJ Capital Dear Members, I am sure that the letter finds you in good spirits, are you ready to jump into the market to catch gems at the bottom? I hope that most of you must have taken our advise based on Market Outlook Reports & now sitting on 25-30% of cash in hand. A recap from my earlier letter for our new investors The Middle Class is undergoing a dramatic change with focus shifting from fulfilling basic needs to desires and aspirations. I believe that as the reference point of average consumer keeps moving up the income ladder, so does the demand for branded higher performance items, even though at higher values. Continuing with our focus on India growth story and burgeoning middle class in particular, our research team has picked a gem from Opalware crockery segment. India is the second fastest growing major economy in the world. Indias GDP on purchasing power parity (PPP) basis was estimated to be USD 4.20 trillion in 2010 making it the fourth largest economy in PPP terms. Opalware crockery is estimated to have a market size of Rs. 600-700 crores and is expected to grow at a CAGR of 20% in the next 5 years. 5. ContdThe organized Opalware industry is estimated to be around Rs 200 crores. The market size for Crystalware is smaller andis estimated at around Rs 15 crores. As the number of families in India increase, the demand for tableware per family willincrease which will augur well for the industry as a whole.The increase in savings has raised the standards of living of the society in general. Shift of consumer preference towardsbranded items is likely to have a positive impact on the industry. Moreover, as lifestyle improves, demand for qualitytableware will increase which will increase the demand for products from the organized sector.Our selection for Business Insight pick of the month is La Opala RG Ltd.La Opala deals in Opalware and Crystalware products and has a strong product portfolio that spans over 100 products. Itis one of the established crockery brands in the country. Company is increasing its capacity in Uttarakhand by 4000 MTwhich will take the total capacity of the company to 12580 MT. The full benefit of this expansion will accrue to thecompany in FY13.Happy Investing!Regards,Kumar Harendra, CEO, HBJ Capital, www.hbjcapital.com#912, 1st "F" Main Road, Girinagar 2nd Phase, BSK 3rd Stage, Bangalore 85Call : 098867 36791, 080 6568 1134 or Mail : Info@hbjcapital.com 6. Indian Tableware Industry 7. Indian Tableware IndustryIndia is the second fastest growing major economy in the world. Indias GDP on purchasing power parity (PPP) basiswas estimated to be USD 4.20 trillion in 2010 making it the fourth largest economy in PPP terms. Opalware crockery isestimated to have a market size of Rs. 600-700 crores and is expected to grow at a CAGR of 20% in the next 5 years. Theorganized Opalware industry is estimated to be around Rs 200 crores. The market size for Crystalware is smaller and isestimated at around Rs 15 crore.The crockery industry comprises of Dinnerware, Tableware, Beverage, Barware in general. The Industry is estimated tobe around 500 cr. Billion of which more than 50% market share is dominated by unorganized sector. La Opala has 10% ofthe market share & plans to grow by 25% Y-o-Y. In the organized market there are a good number of domestic players likeLa Opala RG Ltd, Bharat Bone China Ltd, Hindustan National Glass & Industries , YEAR, TATA Ceramics along with theirmultinational counterparts like Rosenthal,Villeroy & Boch, Noritake, Royal Doulton, Dunoon etc.During the last decade tableware segment of glass industry has made strong efforts to improve quality of glass tablewaremanufactured in India. It is heartening to note that by adoption of latest technology they are now producing internationalquality glass tableware including those of opal and crystal glass. However, tableware segment of the industry is facingtough competition from imports from China and other countries.Price difference at which imported glass tableware are being sold in the Indian market suggests not only dumping thegoods in the Indian market but also evasion of customs duty. Urgent steps therefore need to be taken for checking thisunhealthy competition. Indian industry has made concerted efforts to increase exports. During the last few years theexports have increased many fold. 8. Key growth drivers of IndustryIncreasing per Capita Income - Per capita income to growUSD $3600 in 2011 to approx. USD$ 5000 in 2015.IncreasingPer CapitaIncreasing middle class population - According toImpact of` Income NCAER, middle class population will increase up to 267 MillionGrowth in in the next five years, up 67 % from current level.organizedIncreasingsector MiddleClass Growing Hotel & Catering Industry - Increase in Hotel Population & Catering industry. There are some 1,980 hotels approved andclassified by Government of India. The hospitality industry is Table Ware poised to grow at around 25-30% p.a.IndustryRobust increase in the food industry It opens newopportunities for industries like Tableware, Food Processing etc.Attraction Increasing TowardsHotel &CateringImpact of growth in organized sector - Growth will LuxuryProductsIndustryattract unorganized players to organized sector.Change inTax Change in the life Style of the people -The increase insaving has resulted in standard of living of the people. There istremendous change with respect to branded tableware itemswhich is good for the industry. 9. Contd.Focus towards nuclear familiesThe progressive evolution of family setup in India towards nuclear settlement will increase the demand fortableware.As the number of families in India increase, the demand for tableware per family will increase which will augurwell for the industry as a whole.Increase in incomeIncome of Indian households has increased substantially in the last 10 years. In 2009-10, Indian households whichcome under the middle income bracket and high income bracket increased to 62% and 20% respectively from 58%and 7% in 2001-02.Changes in income tax in the Budget 2011-12 will generate more disposable income in the hands of the publicleading to higher demand for consumer goods.The rise in disposable income will benefit the industry as people will have surplus income to purchase goods suchas tableware.Changing lifestyle of people The increase in savings has raised the standards of living of the society in general. Shift of consumer preference towards branded items is likely to have a positive impact on the industry. Moreover, as lifestyle improves, demand for quality tableware will increase which will increase the demand for products from the organized sector. 10. La Opala RG Ltd 11. SnapshotTrading volume = 43000 shares (approx) per day Thestock usually trades with low volumes, only during last 2-3months volume has increased drastically.EPS ~ 9.69 (TTM) Company has recorded an EPS of Rs9.69 during last 12 months. PE ~ 11.35 - On the basis of TTM earnings. The stock isavailable at very moderate PE multiples, whereas, its margins,ratios, market share, and balance sheet has grownsignificantly over last couple of years. It should therefore bere-rated and trade at higher PE multiples. CMP = 110.85 Rs (Sep 29th 2011) Shareholdings : No of shares [% Share Holding] Total Institution: 11.9 Lakhs [11.28%] Total Individuals Holding: 18.71 Lakhs [19.16%] 52 weeks high/low = Rs 135.8/55.05 The stock Total Promoters: 71.3 Lakhs [67.28%]after making a 52 week high in Sep11 has Total Others : 2.03 Lakhs [2.28 %]corrected by 18% during the ongoing marketcorrection. Debt/Equity Ratio = 1.13 [Mar11] Current Ratio = 1.33 [Mar11] 6 Month peak share price = Rs 135.8 The stock Interest Coverage Ratio = 2.11 times [Mar11]scaled a new 6 month high in September 11. The ROCE = 10.83 % [Mar11]stock deserves as re-rating both owing to the RONW = 7.49 % [Mar11]growth rate and historical valuations. BSE Code: 526947 12. Basic DetailsLa Opala started manufacturing Crystal ware in March1996, sourcing the exclusive right to use the technicalknow-how, information, data for the manufacture andsale of Crystal ware in India and abroad from DoosanGlass of South Korea, a leading manufacturer of Crystalware globally. Headquartered in Kolkata, La Opala hasmanufacturing units in Madhupur (Jharkhand) andSitarganj (Uttarakhand).The company is increasing its capacity in Uttarakhandby 4000 MT which will take the total capacity of thecompany to 12580 MT. This expansion is likely to becompleted by April 2012 and will entail a capitalexpenditure of approximately Rs 23 cr. The full benefit ofthis expansion will accrue to the company in FY13.La Opala deals in Opalware and Crystal ware productsand has a strong product portfolio that spans over 100products. Crystal ware has Barware, Vases, Bowles,Pitchers, Ashtrays, Beer Mugs where as Opalware hasDinner Sets, Coffee Mug Set, Cup & Saucer Sets, Tea &Pudding Sets. 13. Contd. La Opala is one of the established crockery brands in the country. The company has brands that cater to all sections of the society. Diva is the high end brand of the company that caters to the upper segment of the market. It contributes 40% to the companys total sales. The Crystal brand also caters to the upper segment and La Opala brand is targeted towards the mass market. La Opala enjoys large & strong distribution network across all over the country. There are more than 10,000 retail touch points through which the products of La Opala are sold. The products are supplied directly the leading retailers such as; Pantaloons, Big Bazaar, Hypercity, Spencers, Reliance, Lifestyle, etc. The Company is operating in market more than 50% is dominated by unorganized players. Under organized sector, it might face stiff competition with some of the International players like Rosenthal, Royal Doulton etc. These International companies plans to foray its operation by opening several outlets in cities like Hyderabad, Gurgeon, & Chandigarh. The company has made strong presence in countries like U.K., France, Middle East & turkey. Apart from this, it also participates in International Trade Fair in New Delhi & the biggest Tableware Fair In Frankfurt in Germany every year to make presence stronger. 14. Capacity utilization can be improved by 50-60%During 2007 [Plant capacity 4580 MT] Company has spend Rs 7.73Cr for buying 4952 Metric tons of Chemical(main raw material).During 2010 [Plant capacity 8580 MT] Company has spend Rs 9.03Cr for buying 5543 Metric tons of Chemical(main raw material).Conclusion:We have not see much increase in the raw material cost from 2007 to 2010, during the same period wehave seen 87% increase in capacity from 4580 to 8580 MT but there was just 10% increase in the raw material quantity &just 25% increase in finished product, which clearly shown that they are using better technology or able to reduce thewastage but they are under utilized at present and there is huge scope of increasing production. Expected capacity during2012 will be 12580 MT. Think about the increase in product if these capacities can be utilized well. 15. Huge scope of increasing the production Now, if you look at the production of goods in 2007 and again in 2010, you will realize that they have increased theproduction from 1.6 Cr units to 1.9Cr units which is a jump of 25% while there was 87% increase in the capacity for thesame period. Interesting fact is, they have increase just 10% more raw material to during the same period.Also notice that there was 51% jump in the sales amount from 2007 to 2010, this is mainly due to the fact that per unitcost of goods has gone up from Rs30.92 to Rs38.62 which is 25% jump in the finished product price.Now, we have following area where company can improve.They have already good capacity and they are planning to add more, at the same time if they can increase theproduction in the same proportion then it can do wonders for the company.Price of the finished product is likely to be in demand & it will remain strong due to consumption factor. 16. Management & Shareholding Pattern 17. Shareholding Pattern Particulars June-11 June-10June-09June-08June-07Promoters 67.28 66.12 64.36 64.2764.27Institutions11.28 11.32 12.52 12.7714.55Individuals 19.16 20.22 20.55 20.4118.54Others 2.282.34 2.572.552.64 TOTAL100%100%100%100% 100%Key Persons 1. Mr. A C Chakraborthi Chairman 2. Mr. Sushil Jhunjhunwal Managing Director 3. Mr. Ajit JhunjhunwalaDy. Managing Director 4. Mr. G. NarayanaDirector 5. Mr. Arun ChuriwalDirector 6. Mr. Rajiv Gujral Director The promoters group has been increasing its stake in small percentage which clearly shows theconfidence of the futuristic projects. 18. Almost 5-6 times increase in volume during Q2FY12 Sept11 shareholding pattern of public holding more than 1% stake is very imp? During Q2 FY12, we have seen huge volume at this counter. Volume is nothing but the activities and there is most likely some accumulation done by smart folks. Our technofunda team has observed un-usual volume at this counter and suggested for close watch, stock can move much higher. Let us wait for shareholding patter of Sept11 to see who created such volume. As mentioned before, company can enhance their production by 50-60% or more by just utilizing their current capacity without any further addition. 19. Financial Analysis 20. Expect growth of 20% in Sales, 30% in EBITDA/PAT 21. Income Statement (Annual) The top line of the company has beenshowing promising figure over theyears. There has been 14% CAGRgrowth in sales since March 06 & willgrow at 20-22 % CAGR. Sales increases by 30% from FY10 toFY11. During the same period PBDTincreased by 100% which showsimprovement in internal efficiency inthe company. During FY11, PAT was 9.32Cr ascompare to just 2.77Cr in FY10, anincrease of 236%. We project the turnover of thecompany to be double from currentlevel in the time horizon of 3 years. The operating profit margin has goneup from 16.44% to 21.22%. 22. Income Statement (Quarterly) The sales has gone up by 16.25% in June- 11 quarter compared to last year figure of the same period 20.81 Cr. The net profit of the company has increased by 62% due to high turnover & economies of scale, new product offerings, strong brand image. EBITDA margin has increased by 1.62% over last year same period, showing the efficiency of the management in carrying the operation. Interest expense has gone down by 15% in June -11 compared to last year figure in June -10. The company has paid off its debt which will increase the profit of the company. There has been no change in equity capital during last one year. 23. PAT growing 5-10 times faster than Sales A company whose top line is growing at 25% while the bottom line is growing at almost 200% A company decreasing its interest burden at the rate of 15-20% year on year. What is more important is to notice the consistency in growth numbers are maintained during last 4 quarters not onlyin topline but also in bottomline. If the same growth rate continues, this company can deliver returns beyond expectations. 24. Balance Sheet There was no equity dilution duringlast 4 years and most likely there willbe no equity dilution in next fewyears also. Company had paid partly its short &long term debt.Consequently,interest charges will be less incoming quarter results which willresult in more profit. The Balance sheet of the company issmall compared to its competitor butthe potential to grow is clearly visibleby the way management uses thefunds. Company holds approx 27Cr cash inhand. It can be used further toexpand the business without anydelay. 25. Technical Analysis 26. Strong counter likely to rise further High volume trade during last 3 months is a clear indication that this counter is becoming active now and may rise. La Opala is currently trading at a PE of 9.69x FY12E and 8.09x FY13E EPS. We recommend buying on the stock inthe range of Rs80-100 with a 2-3 years holding, target price of Rs 400-600. 27. Rise in EPS & Fall in PE lead to increase in Price During last 4 quarters company has done very well in terms of generating consistent profits hence EPS has gone upquarter after quarter. At the same time PE has come down because there was almost no increase in price till July2011. Smart money is bound to observe rise in EPS or say 200% kind of growth in PAT hence get into this counterbefore it is too late. 28. Investment Rationale 29. Investment Rationale This segment is expected to grow by 10-12% CAGR, but some of the brands are expectedto outperform we have identified La Opala as one of them, which is expected to grow at25-30% CAGR over next 3-5 years. The management of the company is not only focusing on Indian market but also targeting toincrease revenue through export. Investing in plant & machinery & other CAPEX is in linewith to capitalize on economy of scale through increasing the plant capacity. All the required factors for growth are available - The company brand Diva is one of fastestgrowing brand in the country; The top line and the bottom line of the company showingoutstanding growth rate. Effective management, robust growth history along with credit worthiness of company willhelp the company to raise the capital at lower rate of interest. In the last few months stock is being recognized by investors & it has seen the average no oftrades going high. The correction in market has led to equity being available at cheaper price for informedinvestors please note that it is already at discount to fair value. 30. Concerns Rising cost of raw materials La Opalas raw material costs have increased by 39.18% inFY11 over FY10. It is expected to increase at a CAGR of23.49% in the period FY11-13. The high cost of raw materials can to an extent be attributedto rising lead prices used to make Crystalware. La Opala uses hydel power which has helped the company toreduce its costs to a certain extent. Intense competition in the industry The company faces competition from other players in theglassware segment in organized as well as unorganizedsegment. Moreover, there is a threat from cheaper varietiesof goods imported from abroad. La Opala is handling increased competition by controllingcost, relying on new technology and following an aggressivepricing policy. New trends in the market Which will replace the demand for these table ware productswill prove fatal to the company & industry as well. 31. HBJ Capital Services Pvt. Ltd.#912, 1st F Main, Girinagar II Phase,BSK 3rd Stage, Bangalore - 85 Contact: +91 80 65681133/34, Mob : +91 98867 36791E-Mail: Info@hbjcapital.com | www.hbjcapital.com Bangalore |Chennai |New Delhi |HyderabadDisclaimerThis document is not for public distribution and has been furnished to you solely for your information and must not bereproduced or redistributed to any other person. Persons into whose possession this document may come are required toobserve these restrictions. This material is for the personal information of the authorized recipient only.The recommendation made herein does not constitute an offer to sell or solicitation to buy any of the securitiesmentioned. No representation can be made that recommendation contained herein will be profitable or that they will notresult in loss. Information obtained is deemed to be reliable but do not guarantee its accuracy and completeness. Readersusing the information contained herein are solely responsible for their action.HBJ Capital, or its representative will not be liable for the recipients investment decision based on this report. HBJCapital, officers, directors, employees or its affiliates may or may not hold positions in the companies /stocks mentionedherein.