Stock Update

Strong operating performance; upgraded to Buy

Key points
Jyothy Laboratories
ŠŠ Q3FY2018 – Volumes grew in double
Reco: Buy | CMP: Rs363 digit; margin improvement sustained: The
consolidated revenues of Jyothy Laboratories
Ltd (JLL) grew by 15.9% YoY (on comparable
Company details
basis) to Rs 431.2crore in Q3FY18, driven by
Price target: Rs420 volume growth of 11.6% (against 3.6% volume
growth in Q3FY2017). All the key categories
Market cap: Rs6,597 cr
(except household insecticide) have registered
52-week high/low: Rs443/325 strong double digit revenue growth during the
NSE volume: (No of shares) 1.4 lakh quarter. Fabric care, dishwashing and personal
care categories registered strong growth of
BSE code: 532926 17.9%, 18.9% and 37.9% respectively during the
NSE code: JYOTHYLAB quarter. The gross margins (on comparable
basis) improved by 130BPS YoY to 48.3% and the
Sharekhan code: JYOTHYLAB OPM improved by 240BPS YoY to 16.1% during
Free float: (No of shares) 6.0 cr the quarter. The operating profit grew by 36.2%
YoY to Rs69.3crore. The reported PAT grew by
59.3%yoy to Rs32.9crore in Q3FY2018.
Shareholding pattern
ŠŠ Outlook – Volume growth to sustain in the
Public and range of 8-10% in the near term; OPM to hover
others
7%
Foreign around 15%: JLL’s management is expecting a
15%
robust demand environment as demand in the
Institutions rural area has improved in the recent past.
5% This, along with a stable demand environment
Non-promoter in urban India would help JLL achieve volume
corporate growth in the range of 8-10% in the near to
6%
medium term. Though the crude prices have
Promoters gone up, the company is not expecting any drop
67% in gross margins as it has inventory of low price
raw materials (sufficient for next two quarters).
Hence the OPM is expected to sustain in the
Price chart range of 15-16% in the coming quarters.
440
ŠŠ Upgraded to Buy: Venturing into new categories
420 based on the ayurvedic platform and improving
400 the reach of the existing product portfolio will
380
help JLL to achieve double digit earnings growth
in near to medium term. We have downgraded
360
our earnings estimates for FY2018E to factor in
340 higher tax, while we have broadly maintained
320 our earnings estimates for FY2019/20. The stock
has corrected by 6% since we have downgraded
Jan-18
May-17
Jan-17

Sep-17

it to Hold in our last update on 29th December

2017 (corrected by 12% in last one month). Thus
Price performance in view of recent correction and its better growth
prospects we upgrade our rating on the stock
(%) 1m 3m 6m 12m from Hold to Buy with an unchanged price target
Absolute -1.4 -4.3 2.0 9.9 of Rs420.
Relative to Sensex -5.1 -10.3 -6.4 -14.9

January 17, 2018 8

Sharekhan Stock Update

Valuation (consolidated) Rs cr
Particulars FY16 FY17 FY18E FY19E FY20E
Net Sales 1659.5 1749.1 1865.4 2206.9 2542.2
Adjusted PAT 73.8 204.1 240.6 244.5 273.5
EPS (Rs.) 4.3 11.3 13.2 13.5 15.1
OPM(%) 13.4 14.5 14.8 15.5 15.8
PE(X) 85.2 32.1 27.4 27.0 24.1
EV/EBIDTA (X) 31.9 27.5 25.0 19.5 16.1
ROE(%) 8.8 20.5 20.5 18.2 17.9
ROCE(%) 14.8 16.5 17.3 22.1 24.6

Result (consolidated) Rs cr
Particulars Q3FY18 Q3FY17 YoY (%) Q2FY18 QoQ (%)
Total Revenues # 431.2 398.3 8.3 429.9 0.3
Total expenditure 361.9 347.6 4.1 359.0 0.8
Operating profit 69.3 50.7 36.8 70.9 -2.3
Other income 2.3 2.6 -11.7 3.9 -42.1
Depreciation 7.8 7.3 6.3 7.4 5.3
Interest cost 12.0 14.4 -16.7 11.9 1.2
PBT 51.7 31.5 64.5 55.5 -6.8
Tax 18.8 10.8 74.4 9.8 91.6
Adjusted PAT 32.9 20.7 59.3 45.7 -28.0
Reported PAT 32.9 20.7 59.3 45.7 -28.0
EPS (Rs.) 1.8 1.1 59.3 2.5 -28.0
Gross margins (%) 48.3 43.9 436BPS 48.1 15BPS
OPM(%) 16.1 12.7 335BPS 16.5 -42BPS
#Under the GST regime, revenue is calculated net of GST and, hence, is not comparable on YoY basis

Comparable Q3FY2018 snapshot – consolidated Rs cr

Particulars Q3FY18 Q3FY17 Var (%)
Net Sales 431.2 372.0 15.9
Operating Profit 69.3 50.9 36.1
Adjusted PAT 32.9 20.7 58.9
GPM(%) 48.3 47.0 130BPS
OPM(%) 16.1 13.7 240BPS

Segmental performance ŠŠ Home insecticide category de-grew by 10%

ŠŠ The fabric care category grew by 8.9% to Rs.
188.4 crore, on a reported basis while on a
GST comparable basis it grew by 17.9%. Henko
franchisee grew by 23% YoY, Ujala IDD grew by
28% on back of new campaign and Ujala Crisp
& Shine grew by 22.1%. Ujala Supreme grew by
9.7% YoY. A new campaign is to be launched
in January 2018 which would further push the
sales of Ujala Supreme.
ŠŠ The Dish wash category recorded revenue
growth of 12.4% at Rs. 141 crore while on a
comparable basis the segment grew by 18.9%
YoY. The Exo franchisee was up by 19.1% while
Pril grew by 21.1% in Q3FY2018. There were
launches of new campaign from October 2018
for Exo Dishwash bar and Pril liquid. In November
2018, new campaign for Exo Bactoscrub was
launched.
YoY (on a comparable basis) to Rs. 37.5 crore
in Q3FY2018 but was actually down by 17.1%
YoY. The sale of Maxo Coil, down by 32.1%
YoY, was impacted by disruption in wholesale
segment especially in North and East and due
to early onset of winter. The revenue from Maxo
LV (liquid vapouriser) has increased to 33.5%
YoY on a comparable basis as the company is
carrying on an aggressive drive on Maxo Genius
to build household penetration. Hence, Q3FY18
is the second consecutive quarter where the
growth of combi machine is over 100% YoY
(Q2FY18 growth was 145% YoY). The company
is developing formulation for ‘out of the home’
market HI segment, although JLL’s priority
currently is to drive penetration of LV segment.
ŠŠ The personal care category grew significantly
by 31% YoY to Rs. 44.5 crore and 37.8% YoY on

January 17, 2018 9

Sharekhan Stock Update

a comparable basis. The re-launch of Margo
was restaged successfully due to strong back
end support (nearly 60% increase in household
penetration) and also riding on the ayurveda
wave in the market. Margo was up by 43.4% YoY
on a comparable basis. To further ride on the
Ayurveda wave, JLL is planning a series of new
launches in Ayurveda, which will enable the
company to more than double its revenue from
the personal care space by 2021. The company
is planning to enter three new categories
(Neem-based body washes, face washes and
hair tonics) and expand two existing categories
(Margo soap and Neem active toothpaste) in the
Ayurveda business in 2019.

Segment-wise - revenue growth Rs cr

Particluars Q3FY18 Q3FY17 YoY % GST comparable GST Comparable
Q3FY17 Growth (%)
Fabric care 188.4 172.9 8.9 159.8 17.9
Dish washing 141.0 125.5 12.4 118.6 18.9
Household Insecticides 37.5 45.3 -17.1 41.7 -10.0
Personal care 44.5 34.0 30.9 32.3 37.8
Other Products 8.4 10.0 -15.8 9.2 -8.5
Total Consumer 419.9 387.7 8.3 361.6 16.1
Laundry Services 11.3 11.1 2.1 11.1 1.9
Total Revenues 431.2 398.8 8.1 372.7 15.7

Brand-wise revenue growth Rs cr

Particluars Q3FY18 Q3FY17 YoY % GST comparable GST Comparable
Q3FY17 Growth (%)
Ujala 106.2 98.3 8.0 90.5 17.3
Exo 106.9 94.8 12.8 89.8 19.0
Maxo 37.5 45.3 -17.2 41.7 -10.1
Henko 48.7 43.6 11.7 39.6 23.0
Margo 38.0 27.9 36.2 26.5 43.4
Pril 34.8 30.6 13.7 28.8 20.8
Other 47.7 46.7 2.1 44.1 8.2
Laundry 11.3 11.1 1.8 11.1 1.8
Total Revenues 431.1 398.3 8.2 372.1 15.9

Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

January 17, 2018 10

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