You are on page 1of 5

Q4FY17 RESULT UPDATE

RETAIL EQUITY RESEARCH


Jyothy Laboratories Ltd HOLD
Fast Moving Consumer Goods Rating as per Midcap 12months investment period
BSE CODE:532926 NSE CODE: JYOTHYLAB
CMP Rs373 TARGET Rs394 RETURN 6%
Bloomberg CODE: JYL:IN SENSEX: 30,365

24th May, 2017

Company Data
Emerging from slowdown... Market Cap (cr) Rs6,773
Jyothy Laboratories Ltd (JLL) is an Indian FMCG player with Enterprise Value (cr) Rs7,323
products across Fabric care, Dishwashing, Mosquito repellents &
Outstanding Shares (cr) 18.2
Personal Care.
Free Float 33%
JLLs revenue grew at muted 4%YoY in Q4FY17 impacted by
Dividend Yield 1.6%
demonetisation and muted price growth.
EBITDA margins contracted 90bps YoY due to 190bps YoY reduction in 52 week high Rs427
gross margins on muted price growth. 52 week low Rs270
We reduce our FY18E revenue forecasts by 5% factoring the 6m average volume (cr) 0.01
demonetisation, while we expect revival in demand will drive revenue Beta 0.6
to grow at 11% CAGR over FY17-19E. Face value Rs1
EBITDA margins will face medium term headwinds, but once price Shareholding % Q2FY17 Q3FY17 Q4FY17
hikes return with recovery in demand will help in 67bps expansion in Promoters 66.9 66.9 66.9
margins and 25% CAGR in PAT over FY17E-19E. FIIs 13.1 13.3 13.4
We rollover our valuation to FY19E and revise upwards our target price
MFs/Insti 9.7 10.9 9.6
to 394 valuing at 23x FY19E EV/EBITDA, and upgrade our rating from
Public 10.3 8.9 10.1
reduce to hold.
Total 100.0 100.0 100.0
Revenue revival in picture...
Q4FY17 revenue grew 4%YoY, impacted by 6% YoY de-growth in household Price Performance 3mth 6mth 1 Year
insecticides segment due to disruptions from demonetisation. Volume growth
Absolute Return 5.1% 9.4% 24.7%
was healthy at 10% YoY in other segments (excluding household insecticides). We
Absolute Sensex 5.2% 17.4% 20.4%
expect a revival in consumer sentiments from H2FY18E, coupled with products
gaining traction into newer geographies to drive revenue momentum. Factoring Relative Return* -0.1% -8.0% 4.4%
*over or under performance to benchmark index
the demonetisation impact, we marginally reduce our FY18E revenue estimates by
5%, while factor 10% CAGR in revenue over FY17-19E.
400 JLL Sensex rebased
Operating profitability...room for expansion
EBITDA margins contracted 90bps YoY on 190bps reduction in gross margins. 350
Q4FY17 PAT grew 900% YoY due to tax reversals, while pre-tax profit grew
300
9%YoY. Absence of price growth has been impacting the Gross margin and
EBITDA in recent quarters. JLL has initiated price hikes in Q4FY17, but 250
inadequate to overcome the gross margin pressures. Price growth is expected to May 16 Aug 16 Nov 16 Feb 17 May 17
be muted in few more quarters before demand recovery. Margins are expected to
remain stable in FY18E while expected to improve 67bps over FY17-19E. Consolidated (Rs.cr) FY17E FY18E FY19E
Sales 1,749 1,878 2,106
Products gaining traction...
JLL has been focusing on expanding its product pipeline across the country. Growth (%) 5.4 7.4 12.1
Successful regional brands in its product line have the potential to grow national. EBITDA 257 278 323
Product re-launches and new products within the key categories will help gain Margin(%) 14.7 14.8 15.4
market share. Fabric care and Dishwashing will be the key growth segments PAT Adj 145 175 215
which would see gaining market share in the coming years. Growth (%) 54.9 20.9 22.8
Valuations Adj.EPS 8.0 9.6 11.8
JLL is currently trading at 26x one yr forward EV/EBITDA. German FMCG major Growth (%) 54.9 20.9 22.8
Henkels option to buy upto 26% equity in JLL will be watchful. An exercise of
P/E 46.8 38.7 31.5
this option could trigger additional inflow of funds through equity and improve
balance sheet, while we have not factored this in our estimates. We rollover our P/B 6.3 5.9 5.4
valuation to FY19E EV/EBITDA, at 23x upgrade our rating from Reduce to Hold EV/EBITDA 26.6 25.8 21.8
with a revised target price of Rs394. RoE (%) 15.0 15.7 17.8
D/E 0.5 0.4 0.3

Anil R
Analyst
Financials (Consolidated)
Profit & Loss Account
(Rs cr) Q4FY17 Q4FY16 YoY Growth % Q3FY17 QoQ Growth %
Net Revenue 466.1 448.9 3.8 398.3 17.0
EBITDA 60.8 62.9 -3.4 50.9 19.4
Margin (%) 13.1 14.0 -90bps 12.8 +30bps
Depreciation 8.3 10.0 -17.0 7.3 13.7
EBIT 52.5 52.9 - 43.5 20.7
Interest 9.9 15.3 -35.3 14.4 -31.3
Other Income 2.1 3.4 -38.2 2.6 -19
Exceptional Items (0.2) - - (0.2) -
PBT 44.6 41.0 8.8 31.5 41.6
Tax -62.9 30.2 10.8
Reported PAT 107.4 10.8 896 20.7 419
Adjustment 0.2 - - 0.2 -
Adj PAT 107.6 10.8 896 20.9 419
No. of shares (cr) 18.2 18.2 - 18.2 -
EPS (Rs) 5.9 0.6 896 1.1 436

Change in estimates
Old estimates New estimates Change %
Year / Rs cr FY18E FY18E FY18E
Revenue 1,982 1,878 -5.2%
EBITDA 303 278 -8.3%
Margins (%) 15.3 14.8 -50bps
PAT 203 175 -13%
EPS 11.1 9.6 -13%
Consolidated Financials

Profit & Loss Account Balance Sheet

Y.E March (Rs cr) FY15A FY16A FY17A FY18E FY19E Y.E March (Rs cr) FY15A FY16A FY17A FY18E FY19E
Sales 1515 1660 1,749 1,878 2,106 Cash 80 64 103 145 195
% change 14.4 9.6 5.4 7.4 12.1 Accounts Receivable 57 94 123 87 98
EBITDA 192 238 257 278 323 Inventories 185 183 208 221 248
% change 21.9 24.3 7.8 8.2 16.4 Other Cur. Assets 421 368 185 494 554
Depreciation 31 30 28 32 34 Investments 1 0 0 0 0
EBIT 159 207 227 244 288 Gross Fixed Assets 490 502 558 563 568
Interest 14 62 56 41 37 Net Fixed Assets 284 278 306 279 250
Other Income 10 14 11 15 17 CWIP 16 6 9 15 15
PBT 125 143 183 219 269 Intangible Assets 790 792 791 790 788
% change 52.1 14.9 28.1 19.3 22.8 Def. Tax (Net) (1) (25) 134 (50 (5)
Tax 4 69 -26 44 54 Other Assets 3 1 2 3 3
Tax Rate (%) 2.8% 27.5% -13.9% 20.0% 20.0% Total Assets 1837 1760 1862 2029 2146
Reported PAT 121 77 209 175 215 Current Liabilities 290 807 661 422 472
Adj* -15 16 -64 0 0 Provisions 150 91 55 62 69
Adj PAT 106 93 145 175 215 Debt Funds 449 7 16 392 342
% change 24.3 -12.0 54.9 20.9 22.8 Other Liabilities 163 7 47 2 2
No. of shares (mn) 18 18 18 18 18 Equity Capital 18 18 18 18 18
Adj EPS (Rs) 5.8 5.1 8.0 9.6 11.8 Reserves & Surplus 762 828 1064 1134 1243
% change 24.3 -12.0 54.9 20.9 22.8 Shareholders Fund 780 846 1082 1152 1261
DPS (Rs) 4.7 4.7 5.8 5.8 5.8 Total Liabilities 1831 1757 1862 2029 2146
CEPS (Rs) 7.7 6.9 9.6 11.4 13.7 BVPS (Rs) 43 47 60 63 69

*adjusted for one off tax reversal


Cash flow Ratios

Y.E March (Rs cr) FY15A FY16A FY17A FY18E FY19E Y.E March FY15A FY16A FY17A FY18E FY19E
Net inc. + Depn. 154 109 175 209 250 Profitab. & Return
Non-cash adj. (10) 29 (116) 165 19 EBITDA margin (%) 12.7 14.4 14.7 14.8 15.4
Changes in W.C 23 3 (52) (520) (39) EBIT margin (%) 10.5 12.5 13.0 13.0 13.7
C.F.O 166 141 7 (147) 231 Net profit mgn.(%) 7.0 5.6 8.3 9.3 10.2
Capital exp. (16) (26) (59) (11) (5) ROE (%) 14.0 11.5 15.0 15.7 17.8
Change in inv. (14) 22 (2) 0 0
ROCE (%) 9.3 12.2 16.3 13.4 15.5
Other invest.CF 4 4 13 15 17
W.C & Liquidity
C.F - investing (26) 0 (48) 4 12
Issue of equity 0 0 0 0 0 Receivables (days) 15.0 16.7 22.6 20.4 16.1
Issue/repay debt 0 0 46 331 (50) Inventory (days) 43.3 40.5 40.8 41.7 40.6
Dividends paid (42) (174) (106) (106) (106) Payables (days) 54.0 120.6 153.2 105.2 77.4
Other finance.CF (14) (11) (38) (41) (37) Current ratio (x) 1.7 0.8 0.9 2.0 2.0
C.F - Financing (18) (302) (97) 185 (193) Quick ratio (x) 0.5 0.2 0.3 0.6 0.6
Chg. in cash 123 (161) (138) 42 50 Turnover &Levg.
Closing cash 218 (81) (74) 145 195 Gross asset T.O (x) 3.1 3.3 3.3 3.4 3.7
Total asset T.O (x) 0.9 0.9 1.0 1.0 1.0
Int. covge. ratio (x) 11.6 3.3 4.0 6.0 7.8
Adj. debt/equity (x) 0.6 0.2 0.4 0.3 0.3
Valuation ratios
EV/Sales (x) 4.8 4.4 3.9 3.8 3.3
EV/EBITDA (x) 38.1 30.4 26.6 25.8 21.8
P/E (x) 63.8 72.5 46.8 38.7 31.5
P/BV (x) 8.7 8.0 6.3 5.9 5.4
Recommendation Summary (last 3 years) Dates Rating Target
26th May 2014 Reduce 187
400 01st June 2015 Accumulate 314
04th August 2015 Hold 325
23rd October 2015 Accumulate 341
2nd February 2016 Accumulate 328
300 1st November 2016 Reduce 315
24th May 2017 Hold 394

200

100
May 14 May 15 May 16 May 17 *Initiating Coverage

Source: Bloomberg, Geojit Research

Investment Rating Criteria


Large Cap Stocks; Mid Cap and Small Cap;
Buy - Upside is 10% or more. Buy - Upside is 15% or more.
Hold - Upside or downside is less than 10%. Accumulate* - Upside between 10% - 15%.
Reduce - Downside is 10% or more. Hold - Absolute returns between 0% - 10%.
Reduce/Sell - Absolute returns less than 0%.
To satisfy regulatory requirements, we attribute Accumulate as Buy and
Reduce as Sell.
The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is
possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating.
* For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being
upgraded to BUY or downgraded to a HOLD, REDUCE or SELL.

General Disclosures and Disclaimers


CERTIFICATION
I, Anil R, author of this Report, hereby certify that all the views expressed in this research report reflect our personal views about any or all of the subject
issuer or securities. This report has been prepared by the Research Team of Geojit Financial Services Limited, hereinafter referred to as Geojit.
COMPANY OVERVIEW
Geojit Financial Services Limited (hereinafter Geojit), a publically listed company, is engaged in services of retail broking, depository services, portfolio
management and marketing investment products including mutual funds, insurance and properties. Geojit is a SEBI registered Research Entity and as such
prepares and shares research data and reports periodically with clients, investors, stake holders and general public in compliance with Securities and
Exchange Board of India Act, 1992, Securities And Exchange Board Of India (Research Analysts) Regulations, 2014 and/or any other applicable directives,
instructions or guidelines issued by the Regulators from time to time.
DISTRIBUTION OF REPORTS
This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any
other person. Geojit will not treat the recipients of this report as clients by virtue of their receiving this report.
GENERAL REPRESENTATION
The research reports do not constitute an offer or solicitation for the purchase or sale of any financial instruments, inducements, promise, guarantee,
warranty, or as an official confirmation of any transaction or contractual obligations of any kind. This report is provided for assistance only and is not
intended to be and must not alone be taken as the basis for an investment decision. The information contained herein is from publicly available data or other
sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. We have also reviewed the
research report for any untrue statements of material facts or any false or misleading information. While we endeavor to update on a reasonable basis the
information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so.
RISK DISCLOSURE
Geojit and/or its Affiliates and its officers, directors and employees including the analyst/authors shall not be in any way be responsible for any loss or
damage that may arise to any person from any inadvertent error in the information contained in this report. Investors may lose his/her entire investment
under certain market conditions so before acting on any advice or recommendation in these material, investors should consider whether it is suitable for their
particular circumstances and, if necessary, seek professional advice. This report does not take into account the specific investment objectives, financial
situation/circumstances and the particular needs of any specific person who may receive this document. The user assumes the entire risk of any use made of
this information. Each recipient of this report should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in
the securities of companies referred to in this report (including the merits and risks involved). The price, volume and income of the investments referred to in
this report may fluctuate and investors may realize losses that may exceed their original capital.

FUNDAMENTAL DISCLAIMER
We have prepared this report based on information believed to be reliable. The recommendations herein are based on 12 month horizon, unless otherwise
specified. The investment ratings are on absolute positive/negative return basis. It is possible that due to volatile price fluctuation in the near to medium
term, there could be a temporary mismatch to rating. For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. The
stocks always carry the risk of being upgraded to buy or downgraded to a hold, reduce or sell. The opinions expressed are subject to change but we have no
obligation to tell our clients when our opinions or recommendations change. This report is non-inclusive and does not consider all the information that the
recipients may consider material to investments. This report is issued by Geojit without any liability/undertaking/commitment on the part of itself or any of
its entities. We may have issued or may issue on the companies covered herein, reports, recommendations or information which is contrary to those contained
in this report.

The projections and forecasts described in this report should be evaluated keeping in mind the fact that these are based on estimates and assumptions and
will vary from actual results over a period of time. The actual performance of the companies represented in the report may vary from those projected. These
are not scientifically proven to guarantee certain intended results and hence, are not published as a warranty and do not carry any evidentiary value
whatsoever. These are not to be relied on in or as contractual, legal or tax advice. Prospective investors and others are cautioned that any forward-looking
statements are not predictions and may be subject to change without notice.
JURISDICTION
The securities described herein may not be eligible for sale in all jurisdictions or to all categories of investors. The countries in which the companies
mentioned in this report are organized may have restrictions on investments, voting rights or dealings in securities by nationals of other countries.
Distributing/taking/sending/dispatching/transmitting this document in certain foreign jurisdictions may be restricted by law, and persons into whose
possession this document comes should inform themselves about, and observe any such restrictions. Failure to comply with this restriction may constitute a
violation of any foreign jurisdiction laws. Foreign currencies denominated securities are subject to fluctuations in exchange rates that could have an adverse
effect on the value or price of or income derived from the investment. Investors in securities such as ADRs, the value of which are influenced by foreign
currencies effectively assume currency risk.

REGULATORY DISCLOSURES:
Geojits Associates consists of privately held companies such as Geojit Technologies Private Limited (GTPL- Software Solutions provider), Geojit Credits
Private Limited (GCPL- NBFC Services provider), Geojit Investment Services Limited (GISL- Corporate Agent for Insurance products), Geojit Financial
Management Services Private Limited (GFMSL) & Geojit Financial Distribution Private Limited (GFDPL), (Distributors of Insurance and MF Units).In the
context of the SEBI Regulations on Research Analysts (2014), Geojit affirms that we are a SEBI registered Research Entity and in the course of our business as a
stock market intermediary, we issue research reports /research analysis etc that are prepared by our Research Analysts. We also affirm and undertake that no
disciplinary action has been taken against us or our Analysts in connection with our business activities.
In compliance with the above mentioned SEBI Regulations, the following additional disclosures are also provided which may be considered by the reader
before making an investment decision:
1. Disclosures regarding Ownership*:
Geojit confirms that:
(i) It/its associates have no financial interest or any other material conflict in relation to the subject company (ies) covered herein.
(ii) It/its associates have no actual beneficial ownership greater than 1% in relation to the subject company (ies) covered herein.
Further, the Analyst confirms that:
(i) he, his associates and his relatives have no financial interest in the subject company (ies) covered herein, and they have no other material conflict in the
subject company.
(ii) he, his associates and his relatives have no actual/beneficial ownership greater than 1% in the subject company covered
2. Disclosures regarding Compensation:
During the past 12 months, Geojit or its Associates:
(a) Have not received any compensation from the subject company; (b) Have not managed or co-managed public offering of securities for the subject
company (c) Have not * received any compensation for investment banking or merchant banking or brokerage services from the subject company. (d) Have
not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company
(e) Have not received any compensation or other benefits from the subject company or third party in connection with the research report (f) The subject
company is / was not a client during twelve months preceding the date of distribution of the research report.
3. Disclosure by Geojit regarding the compensation paid to its Research Analyst:
Geojit hereby confirms that no part of the compensation paid to the persons employed by it as Research Analysts is based on any specific brokerage services
or transactions pertaining to trading in securities of companies contained in the Research Reports.
4. Disclosure regarding the Research Analysts connection with the subject company:
It is affirmed that the I Anil R Research Analyst(s) of Geojit have not served as an officer, director or employee of the subject company
5. Disclosure regarding Market Making activity:
Neither Geojit/its Analysts have engaged in market making activities for the subject company.

Please ensure that you have read the Risk Disclosure Documents for Capital Market and Derivatives Segments as prescribed by the Securities and
Exchange Board of India before investing
Digitally signed by ANIL R
Date: 2017.05.24 12:35:29 +05'30'

Geojit Financial Services Ltd. (formerly known as Geojit BNP Paribas Financial Services Ltd.), Registered Office: 34/659-P, Civil Line Road, Padivattom,
Kochi-682024, Kerala, India. Phone: +91 484-2901000, Fax: +91 484-2979695, Website: geojit.com. For investor queries: customercare@geojit.com, For
grievances: grievances@geojit.com, For compliance officer: compliance@geojit.com.

Corporate Identity Number: L67120KL1994PLC008403, SEBI Regn.Nos.: NSE: INB/INF/INE231337230 I BSE:INB011337236 & INF011337237 | MSEI:
INE261337230, INB261337233 & INF261337233, Research Entity SEBI Reg No: INH200000345, Investment Adviser SEBI Reg No: INA200002817, Portfolio
Manager:INP000003203, NSDL: IN-DP-NSDL-24-97, CDSL: IN-DP-CDSL-648-2012, ARN Regn.Nos:0098, IRDA Corporate Agent (Composite) No.: CA0226.
Research Entity SEBI Registration Number: INH200000345