IDFC Securities - Jyothi Infraventures (531537) Jyothy Laboratories Q2FY19 results (Outperformer) - In line results; volume growth to recover from Q3

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IDFC Securities

Jyothy Laboratories' Q2FY19 results (Outperformer) - In line results; volume growth to recover from Q3

Q2FY19 result highlights

Jyothy Laboratories’ (JYL) standalone net revenues increased by 7% yoy to Rs4bn, EBITDA increased by 13% yoy to Rs731m, PBT was up 10% yoy to Rs571m and Reported PAT was up 7.7% yoy to 455m.
Volumes increased by 4.4%. Dishwash, Fabric care and Personal care segment revenues increased by 13.9%,10.8% and 6.1% yoy respectively while HI revenues declined by 19.8% yoy
In terms of power brands, Henko, Exo & Pril sales increased by 20.7%,14.7% and 11.9% yoy. Ujala sales growth was muted at 6.1% yoy while Maxo sales declined by 19.8% yoy.
Gross margins increased by 150bp yoy to 45.9%. Staff cost increased 14% yoy, A&P spends were up 1% yoy while other expenses increased by 10% yoy. Resultant EBITDA increased by 13% yoy; margins expanded 90bps to 17.1%.
Other income was down 59% yoy, interest cost declined by 32% yoy while tax rate was up 140bps resulting in PAT growth of 7.7% yoy.

Key positives: Expansion in gross margins in spite of input cost pressures.

Key negatives: Weak volume growth due to Kerala floods impact. Sharp decline in HI sales

Impact on financials: We have reduced our FY19-21E earnings estimate by 1-2% each.

Valuations & view

JYL’s 2QFY19 was marginally below expectations; however, excluding impact of Kerala floods and weak season for HI, the performance has been satisfactory. Going forward, we are factoring volume led 13% revenue CAGR over FY19-21E led by improving demand scenario, innovations and share gains in key power brands. Further price/mix led margin expansion & decline in interest costs led by reduction in debt will drive ahead of peers earnings growth (21% CAGR over FY19-21E). We believe current valuations (28xFY20E earnings) at a 25%+ discount to the average PE multiple of Indian (non-MNC) FMCG players are attractive. Further, from a longer term perspective, we believe JYL’s portfolio has the potential, with the right execution, to drive sustainable volume growth. Maintain Outperformer.

25/10/2018 5 EN

Underlying

Jyothi Infraventures

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INE681K01018 BSE Ltd. India

Provider

IDFC Securities

IDFC Securities Ltd., a subsidiary of the Infrastructure Development Finance Company (IDFC) wherein the Government of India holds a 20% interest, is India's leading equities broker catering to most of the prominent financial institutions, both foreign and domestic investing in Indian equities. A research team of experienced and dedicated experts ensures the flow of critically investigated stock ideas and portfolio strategies for our clients. Our coverage spans across various growth sectors such as agriculture, automobiles, Consumer Goods, Technology, Healthcare, Infrastructure, Media, Power, Real Estate, Telecom, Capital Goods, Logistics, Cement amongst other sectors. Our clients value us for our strong research-led investment ideas, superior client servicing track record and exceptional execution skills.

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Jyothy Laboratories' Q2FY19 results (Outperformer) - In line results; volume growth to recover from Q3

Jyothy Laboratories' Q1FY19 results (Outperformer) - Volume growth disappoints in an otherwise in line quarter

GMR Infrastructure's Q3FY20 results (Outperformer) - Air traffic growth improved at the airports; deleveraging process gains momentum

Ambuja Cement's Q4CY19 results (Outperformer) - In line; cost efficiencies at play

Event update: Aurobindo Pharma (Outperformer) - Unit IV receives EIR; positive outcome

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