Jyothy Laboratories (Q2 FY13)

India Infoline News Service | Mumbai |

Jyothy Laboratories (Q2 FY13)

CMP Rs177, Target price Rs197, Upside 11.4% 
  • Jyothy Laboratories (JLL) recorded modest 15% yoy growth in revenues at Rs1.8bn during Q2 FY13, impacted by distribution re-alignment. Secondary sales registered 25%+ yoy growth driven by Exo, which registered 18% yoy growth as the brand was launched across major cities and has received encouraging response. JLL has increased prices of Maxo by 12%, which impacted volumes but considerably improved profitability (Rs21mn profit against Rs79mn loss in Q2 FY12). The sales are already on a recovery path from November and the management expects to register 20%+ growth for H2 FY13.

  • Henkel revenues registered a 20% yoy decline as the company lost one full month sales due to change in distribution, resulting in a loss of Rs150mn during the quarter. We expect JLL to witness a strong surge in revenues during H2 FY13 and achieve the revenue target of Rs5bn in Henkel portfolio in FY13. We expect the company to register operating margins of ~12-13% for H2 FY13.

Henkel’s key financials
(Rs mn) Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13
Net sales 1,075 638 879 1,149 847
EBITDA 123 27 23 117 (2)
OPM (%) 12 4 3 10 (0)
Other inc. - - - - -
Interest (128) (37) (38) (131) (132)
Depreciation (23) (13) (13) (17) (17)
PBT (28) (23) (28) (31) (151)
PAT (28) (23) (28) (31) (151)
Source: Company, India Infoline Research 
  • Gross margins for the quarter increased by 710bps to 49.2% as trade margin cuts and price increases fuelled profitability. Operating margins witnessed sharp 770bps expansion at 12.5% aided by sharp 860bps drop in raw material cost. The management has indicated adspends to sales ratio of ~9-10% for FY13 as the company plans slew of re-launches over next few months beginning with Ujala re-launch in November’12.

Cost analysis
As a % of net sales Q2 FY12 Q2 FY11 bps yoy Q1 FY12 bps qoq
Material costs 26.3 35.0 (865) 37.4 (1,103)
Purchase of goods 24.6 23.1 154 21.3 336
Personnel costs 13.2 13.4 (17) 10.7 256
Advertising cost 9.0 10.9 (196) 7.8 117
Other overheads 14.4 12.8 154 11.1 322
Total costs 87.5 95.2 (769) 88.3 (72)
Source: Company, India Infoline Research

Change in margin structure across brands
  Stockist margin Retailer margin
Brand Old Revised Old Revised
Exo 6-8 6 8-15 8-10
Maxo 6-8 6 10 10
Maya 6-8 6 10-20 10-15
More Light 6-11 6 10-15 10
Ujala 8 6 10-14 10
Industry   4-5   8-10
Source: Company, India Infoline Research  
  • JLL registered 22.3% yoy growth in net profit partly aided by improved operating efficiency and higher other income. Effective tax rate for the quarter was lower at 19.6% against 26.3% in Q2 FY12. The PAT growth could have been even better but for the higher interest costs on Henkel acquisition. We have reduced our FY13 and FY14 EPS estimates by ~5%/~3% respectively factoring in the integration impact on sales.
Changes in estimates
(Rs mn) FY13E FY14E
  New Old Change (%) New Old Change (%)
Net sales 13,587 13,587 0.0 16,895 17,026 (0.8)
EBITDA 1,800 1,821 (1.1) 2,492 2,537 (1.8)
OPM (%) 13.3 13.4 (0.2) 14.8 14.9
BSE 371.00 1.40 (0.38%)
NSE 372.70 3.30 (0.89%)

***Note: This is a NSE Chart

 

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