CRISIL lowers Opal Luxury's fair value to Rs 95

CRISIL Research's report on Opal Luxury Time Products

"Opal Luxury Time Products' (Opal's) H1FY14 results were below CRISIL Research's expectations. Revenues were flat at Rs 96.2 mn in H1FY14 against Rs 95.6 mn in H1FY13. EBITDA margin contracted sharply by 1,239 bps to 10.1 percent from 22.4 percent in H1FY13 on account of higher input costs and other expenses. The company reported net loss of Rs 7.5 mn in H1FY14 compared to net profit of Rs 14.1 mn in H1FY13. Owing to weak consumer sentiments prevailing in the market, we expect Opal's revenue growth to remain subdued in the near term. We retain our fundamental grade of 4/5."

We have lowered our revenue estimates for FY14 and FY15 by 16 percent and 20 percent, respectively, considering the weak demand for Opal's products. EBITDA margin estimates for FY14 and FY15 have been lowered by 799 bps and 383 bps, respectively, on account of higher input costs and SG&A expenses. Subsequently, PAT estimate for FY15 has been lowered by 67 percent (we expect the company to post a net loss of Rs 0.6 mn in FY15). We have rolled forward estimates by one year to FY16 but the impact on valuation is offset by lowered revenue and earnings estimates. We continue to use the discounted cash flow (DCF) method to value Opal and have lowered our fair value estimate to Rs 95 from Rs 115.

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