jyothy laboratories ltd (jll) -...
TRANSCRIPT
-
1
Jyothy Laboratories Ltd (JLL)
BUY Target Price: Rs.201.00 CMP: Rs.175.00 Market Cap.: Rs.12699.75mn.
Date: February 16, 2010
Key Ratios:
Particulars FY09* FY10E FY11E
OPM (%) 16 19 19
NPM (%) 11 14 14
ROE (%) 12 18 18
ROCE (%) 20 28 27
P/BV(x) 3.86 3.16 2.59
P/E(x) 31.67 17.47 14.48
EV/EBDITA(x) 22.03 12.60 10.52 *note: Company has changed its financial year to April-March from July
June, so FY09 is for 9 Months.
Key Data:
Sector FMCG Sector
Face Value Rs.1.00
52 wk. High/Low (Rs.) 192.00/50.01
Volume (2 wk. Avg.) 33000
BSE Code 532926
SYNOPSIS
Jyothy Laboratories Limited engages in the
research, manufacture, marketing, and branding of
fast moving consumer goods in India.
Company Exports to 14 countries including srilanka,
Bangladesh, Mauritius, Malaysia, UAE, Hong Kong
and Saudi Arabia.
Jyothy Laboratories plans to exit from Balaji
Telebrands Limited by selling its stake in the joint
venture. The company holds 50% stake in the joint
venture.
Ujala is main product which it contributes its share
in gross sales is more than 50%.
Net sales and PAT of the company are expected to
grow at a CAGR of 19% and 19% over 2008 to
2011E respectively.
Share Holding Pattern:
V.S.R. Sastry
Vice President
Equity Research Desk
91-22-25276077
Dr. V.V.L.N. Sastry Ph.D.
Chief Research Officer
-
2
Table of Content
Investment Highlights ............................................................................................................ 3
Company Profile.4
Peer Group comparison...6
Keyconcern.6
Financials.7
Charts....9
Outlook and conclusions....11
Industry Overview...... ..12
-
3
Investment Highlights
Q3 FY10 Results Update
Jyothy Laboratories reported a good increase in standalone net profit for the quarter
ended December 2009. During the quarter, the profit of the company rose 24.97% to
Rs.168.45 million from Rs.134.79 million in the same quarter last year. Net sales for the
quarter for the quarter rose 13.53% to Rs.1,356.43 million from Rs.1194.79 million for the
same quarter last year, while total income for the quarter rose 13.99% to Rs 1,389.08
million, when compared with the prior year period. It reported earnings of Rs 2.32 a share
during the quarter, registering 24.97% growth over prior year period.
Quarterly Results - Standalone (Rs in mn)
As At Dec-09 Dec-08 %change
Net sales 1356.43 1194.79 13.53
Net profit 168.45 134.79 24.97
Basic EPS 2.32 1.86 24.97
-
4
Break Even Expenses
Company Profile
Jyothy Laboratories (JLL) was started by M P Ramachandran as a proprietary concern in 1983
manufacturing and marketing a single fabric care product Ujala The company owns 21
manufacturing facilities located in 14 locations Trichur, Wynad, Roorkee, Pondicherry,
Chennai, Hyderabad, Bhubaneshwar, Bankura, Guwahati, Baddi, Silvassa, Salem, Jammu and
Pithampur. The companys manufacturing plants are ISO 9001 and ISO 1400 certified for its
quality manufacturing.It has employee strength of 3,500 people.
The company operates 40 depots to service customer requirements. Jyothy has a team of 1,500
marketing personnel and a marketing network of 2,500 distributors. The company has a pan-
India presence with a reach to over 750,000 Indian households. The company exports its
products to 14 countries that include Sri Lanka, Bangladesh, Mauritius, Malaysia, UAE, Hong
Kong and Saudi Arabia.
-
5
Today Jyothy Laboratories is a multi-product company owning brands like Ujala, Maxo, Exo,
Jeeva and Maya. The company has diversified its operationa in area of fabric care, household
insecticide, incense candles and personal care. Jyothy Laboratories owes its genesis to an
unflinching faith in the power of innovation. This urge to innovate has found expression in
every product category, brand and operation of the organization.
The companys research and development facility focuses in area of new formulations, creating
cost effective processes and new product offering.
Company Products
Business divisions
Fabric Care
Ujala supreme
Ujala washing powder
House hold insectiside
Maxo cyclothrin coil
Maxo cyclothrin liquid
Maxo Aerosol
Utensil Cleaners
Exo dish wash bar
Exo dish wash liquid
Fragrances
Maya.
Personal care
Jeeva naturals
-
6
Allied Business
Continental special
Godrej Tea
Ektas Dhoop
Peer Group Comparison
Name of the company CMP (Rs.)
Market
Cap.(Rs.mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend(%)
Jyothy Laboratories Ltd 175.00 12699.75 5.53 31.67 3.86 200.00
ITC Ltd 250.00 949815.4 10.11 24.72 6.94 370.00
HUL 238.05 517110.8 9.24 25.65 25.08 750.00
Marico Ltd 99.80 60806.2 2.97 33.60 16.52 65.50
Key Concerns
Rising prices of raw materials and fuels.
Change in fiscal benefits/ laws.
People attraction and retention.
Competitive environment with diverse Players.
-
7
Financials Results
12 Months Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) FY08 FY09 FY10E FY11E
Description 12m 9m 12m 12m
Net Sales 3753.01 3523.77 5349.24 6419.09
Other Income 79.05 69.07 128.17 147.39
Total Income 3832.06 3592.84 5477.41 6566.48
Expenditure -3060.51 -3016.26 -4469.40 -5359.94
Operating Profit 771.55 576.58 1008.01 1206.54
Interest -6.82 -2.72 -0.72 -0.74
Gross profit 764.73 573.86 1007.28 1205.80
Deprecation -74.08 -68.12 -99.37 -109.31
Profit Before Tax 690.65 505.74 907.91 1096.50
Tax -166.58 -104.69 -180.90 -219.30
Profit After Tax 524.07 401.05 727.01 877.20
Equity capital 72.57 72.57 72.57 72.57
Reserves 2865.12 3219.38 3946.39 4823.59
Face value (Rs.) 1.00 1.00 1.00 1.00
EPS 7.22 5.53 10.02 12.09
*note: Company has changed its financial year to April-March from July June, so FY09 is for 9 Months.
-
8
Quarterly Ended Profit & Loss Account (Standalone)
Value(Rs.in.mn) 30-Jun-09 30-Sep-09 31-Dec-09 31-Mar-10E
Description 3m 3m 3m 3m
Net sales 1196.17 1304.57 1356.43 1492.07
Other income 28.12 31.48 32.65 35.92
Total Income 1224.29 1336.05 1389.08 1527.99
Expenditure -907.68 -1138.27 -1170.11 -1253.34
Operating profit 316.61 197.78 218.97 274.65
Interest 0.00 -0.47 -0.12 -0.13
Gross profit 316.61 197.31 218.85 274.51
Deprecation -23.18 -23.60 -25.78 -26.81
Profit Before Tax 293.43 173.71 193.07 247.70
Tax -74.15 -32.59 -24.62 -49.54
Profit After Tax 219.28 141.12 168.45 198.16
Equity capital 72.57 72.57 72.57 72.57
Face value (Rs.) 1.00 1.00 1.00 1.00
EPS 3.02 1.94 2.32 2.73
-
9
Charts:
-
10
-
11
1 Year Comparative Graph
Outlook and Conclusion
At the current market price of Rs.175.00, the stock is trading at 17.47 x FY10E and
14.48 x FY11E respectively.
Price to Book Value of the stock is expected to be at 3.16 x and 2.59 x respectively
for FY10E and FY11E.
Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen
at Rs.10.02 and Rs.12.09 respectively.
Net Sales and PAT of the company is expected to grow at a CAGR of 19% and 19%
over 2008 to 2011E respectively.
On the basis of EV/EBITDA, the stock trades at 12.6 x for FY10E and 10.52 x for
FY11E.
We expect that the company will keep its growth story in the coming quarters also.
We recommend BUY in this particular scrip with a target price of Rs.201.00 for
Medium to Long term investment.
Jyothy Laboratories BSE SENSEX
-
12
Industry Overview
Items in this category include all consumables (other than groceries/pulses) people buy at
regular intervals. The most common in the list are toilet soaps, detergents, shampoos,
toothpaste, shaving products, shoe polish, packaged foodstuff, household accessories and
extends to certain electronic goods. These items are meant for daily of frequent
consumption and have a high return.
A major portion of the monthly budget of each household is reserved for FMCG products.
The volume of money circulated in the economy against FMCG products is very high, as the
number of products the consumer use is very high. Competition in the FMCG sector is very
high resulting in high pressure on margins
FMCG companies maintain intense distribution network. Companies spend a large portion
of their budget on maintaining distribution networks. New entrants who wish to bring their
products in the national level need to invest huge sums of money on promoting brands.
Manufacturing can be outsourced. A recent phenomenon in the sector was entry of
multinationals and cheaper imports. Also the market is more pressurized with presence of
local players in rural areas and state brands
Scope of the Sector
The Indian FMCG sector with a market size of US$13.1 billion is the fourth largest sector in
the economy. A well-established distribution network, intense competition between the
organized and unorganized segments characterizes the sector. FMCG Sector is expected to
-
13
grow by over 60% by 2010. That will translate into an annual growth of 10% over a 5-year
period. It has been estimated that FMCG sector will rise from around Rs 56,500 crores in
2005 to Rs 92,100 crores in 2010. Hair care, household care, male grooming, female hygiene,
and the chocolates and confectionery categories are estimated to be the fastest growing
segments, says an HSBC report. Though the sector witnessed a slower growth in 2002-2004,
it has been able to make a fine recovery since then.
Growth Prospects
With the presence of 12.2% of the world population in the villages of India, the Indian rural
FMCG market is something no one can overlook. Increased focus on farm sector will boost
rural incomes, hence providing better growth prospects to the FMCG companies. Better
infrastructure facilities will improve their supply chain. FMCG sector is also likely to benefit
from growing demand in the market. Because of the low per capita consumption for almost
all the products in the country, FMCG companies have immense possibilities for growth. And
if the companies are able to change the mindset of the consumers, i.e. if they are able to
take the consumers to branded products and offer new generation products, they would be
able to generate higher growth in the near future. It is expected that the rural income will
rise in 2007, boosting purchasing power in the countryside.
However, the demand in urban areas would be the key growth driver over the long term.
Also, increase in the urban population, along with increase in income levels and the
availability of new categories, would help the urban areas maintain their position in terms of
consumption. At present, urban India accounts for 66% of total FMCG consumption, with
rural India accounting for the remaining 34%. However, rural India accounts for more than
40% consumption in major FMCG categories such as personal care, fabric care, and hot
-
14
beverages. In urban areas, home and personal care category, including skin care, household
care and feminine hygiene, will keep growing at relatively attractive rates. Within the foods
segment, it is estimated that processed foods, bakery, and dairy are long-term growth
categories in both rural and urban areas
Indian Competitiveness and Comparison with the World Markets
The following factors make India a competitive player in FMCG sector:
Availability of raw materials
Because of the diverse agro-climatic conditions in India, there is a large raw material base
suitable for food processing industries. India is the largest producer of livestock, milk,
sugarcane, coconut, spices and cashew and is the second largest producer of rice, wheat and
fruits &vegetables. India also produces caustic soda and soda ash, which are required for the
production of soaps and detergents. The availability of these raw materials gives India the
location advantage.
________________ ____ _________________________
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other
sources believed to be reliable but do not represent that it is accurate or complete and it
should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of its
affiliates shall not be in any way responsible for any loss or damage that may arise to any
person from any inadvertent error in the information contained in this report. This document
is provide for assistance only and is not intended to be and must not alone be taken as the
basis for an investment decision.
-
15
Firstcall India Equity Research: Email [email protected]
B. Harikrishna Banking
B. Prathap IT
A. Rajesh Babu FMCG
C.V.S.L.Kameswari Pharma
U. Janaki Rao Capital Goods
E. Swethalatha Oil & Gas
D. Ashakirankumar Auto
Rachna Twari Diversified
Kavita Singh Diversified
Nimesh Gada Diversified
Priya Shetty Diversified
Tarang Pawar Diversified
Neelam Dubey Diversified
Firstcall India also provides
Firstcall India Equity Advisors Pvt.Ltd focuses on, IPOs, QIPs, F.P.Os,Takeover Offers, Offer for Sale and Buy Back Offerings.
Corporate Finance Offerings include Foreign Currency Loan Syndications,
Placement of Equity / Debt with multilateral organizations, Short Term Funds
Management Debt & Equity, Working Capital Limits, Equity & Debt
Syndications and Structured Deals.
Corporate Advisory Offerings include Mergers & Acquisitions(domestic and
cross-border), divestitures, spin-offs, valuation of business, corporate
restructuring-Capital and Debt, Turnkey Corporate Revival Planning &
Execution, Project Financing, Venture capital, Private Equity and Financial
Joint Ventures
Firstcall India also provides Financial Advisory services with respect to raising
of capital through FCCBs, GDRs, ADRs and listing of the same on International
Stock Exchanges namely AIMs, Luxembourg, Singapore Stock Exchanges and
other international stock exchanges.
For Further Details Contact:
3rd Floor,Sankalp,The Bureau,Dr.R.C.Marg,Chembur,Mumbai 400 071
Tel. : 022-2527 2510/2527 6077/25276089 Telefax : 022-25276089
E-mail: [email protected]
www.firstcallindiaequity.com