Jyothy Laboratories' Q1FY20 results (Outperformer) - Weak start, volumegrowth to recover going ahead
Q1FY20 result highlights
- Jyothy Laboratories’ (JYL) standalone net revenue grew by 2.3% yoy to Rs4.1bn (est: Rs4.2bn), EBITDA grew by 9.9% yoy to Rs655m (est: Rs621m), PBT (bei) was up 10.5% yoy to Rs458m (est: Rs461m); Reported PAT was up 11.6% yoy.
- Consolidated revenues grew by 2.2% yoy, EBITDA was up 15.8% yoy & PBT(bei) was up 10% yoy.
- Overall volumes grew by 5.6% yoy (est; 5%), Ex-HI the volume growth was 7.6% yoy. The growth was driven by Henko & Margo which grew by 23% and 14.5% yoy. Ujala franchise grew by 2.8% yoy. Dishwash sales were muted at 1.1% due to downstocking of existing stock for launch of Exo Ginger. HI sales declined by 22% yoy for the quarter.
- Consolidated gross margins improved by 70bps yoy to 48.6% (standalone gross margins were up 70bps yoy) led by benign input costs. Staff cost increased 5% yoy, A&P spends were up 4% yoy (up 20bps as a % to sales to 8%) while other expenses decreased by 10% yoy. Resultant EBITDA margins increased by 180bps to 16.4%. Adj for Rs51.4m benefit due to IND AS led reclassification, EBITDA grew by 6.7% yoy with margin expansion of 60bps to 14.3%.
Key positives: Healthy growth in Margo & Henko franchise.
Key negatives: Weak performance in HI & Dishwash.
Impact on financials: We cut our FY20/21E earnings by 5%/4%.
Valuations & view
JYL had a weak start to FY20 led by weakness in HI & channel destocking in Dishwash. While challenges in HI segment are likely to continue, we believe, volume growth trajectory is expected to improve going forward with recovery in Dishwash and continued strong growth in Henko & Margo. However, given the moderation in consumer demand & higher promotional intensity, we have cut our revenue assumptions & are now factoring in 11% CAGR over FY19-21E. Further, from a longer-term perspective, we believe JYL’s portfolio has the potential, with the right execution, to drive sustainable volume growth. With current valuations (27x/23x FY20/21E earnings) at a 30%+ discount to the average PE multiple of Indian (non-MNC) FMCG players, we believe, downside is capped. Maintain Outperformer.
Jyothy Labs Limited, formerly Jyothy Laboratories Limited, is a multi-brand, multi-product company focused on fast-moving consumer goods industry. The Company is principally engaged in manufacturing and marketing of fabric whiteners, soaps, detergents, mosquito repellents, scrubber, bodycare and incense sticks. It operates through three segments: Soaps and Detergents, which includes fabric whiteners, fabric detergents, dish wash bar and soaps, including ayurvedic soaps; Home Care products, which includes incense sticks, scrubber, dhoop and mosquito repellents, and Others, which includes bodycare, tea and coffee. It products are under various brands, which include Henko, Mr. White, Ujala, More light, Chek, Pril, Exo, Maxo, Margo, Fa, Neem, Fabric Spa, Snoways, Busy easy and Wardrobe. Its subsidiaries include Jyothy Consumer Products Marketing Limited, Four Seasons Drycleaning Company Private Limited, Snoways Laundrers & Drycleaners Private Limited and Jyothy Fabricare Services Limited.
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