La Opala RG Ltd Q1FY25: Worst is behind?

With a steady ramp-up in utilization, La Opala is poised to surpass Rs 500 crore in revenue with Rs 165 crore in net profits by FY26

La opala Q1FY25 earnings update

Since our last discussion, La Opala has continued to face headwinds, primarily due to subdued consumer sentiments. In Q1FY25, the company reported a 15% decline in revenue, alongside a contraction of 370 basis points (bps) in operating margins. This performance reflects the ongoing challenges in the market, particularly with respect to consumer demand.

Currently, La Opala’s capacity utilization is hovering above 70%. However, the company is optimistic about gradually increasing this figure, particularly from H2FY25 onwards, driven by anticipated demand during the upcoming festive season. This seasonal uplift could provide much-needed momentum to their operations.

One of the strategic moves made by La Opala this quarter was the closure of its old and obsolete opalware and crystalware plant at Madhupur, which had capacities of 4,000 MTPA and 1,000 MTPA, respectively. While this will cause some short-term disruptions, the operations have been transferred to the Sitarganj unit, which boasts advanced technology and higher efficiency. The Madhupur unit was aging and inefficient, and this transition is expected to significantly improve operational efficiency starting next year.

Earlier, the company had guided for an additional Rs 100 crore in revenue from its borosilicate glass category over FY25 and FY26. However, there has been no clear update on when the new plant for this category will commence operations. As a result, we are not factoring in any additional revenue from borosilicate glass at this stage.

Looking ahead, we believe La Opala can achieve over 95% capacity utilization by FY26, which could drive the company’s revenue past Rs 500 crore. With projected PAT margins of 32%, this translates to potential profits of Rs 165 crore.

Currently, the stock is trading at 22 times FY26 earnings. If we apply a price-to-earnings (PE) multiple of 32x—a significant discount to its 10-year average PE of 42x (reflecting the slower growth environment)—the market cap could exceed Rs 5,200 crore vs. today market cap. of 3500 Crore which gives a potential upside of 50 percent.

La Opala faces near-term challenges, its strategic initiatives and long-term growth prospects remain intact. Investors should watch for demand recovery in H2FY25 and the successful ramp-up of new capacities, which could be key catalysts for the stock.