MOSL: JYOTHY LABORATORIES (Neutral)-Significant miss on all fronts; Outlook unclear
Jyothy Laboratories: Significant miss on all fronts; Outlook unclear
(JYL IN, Mkt Cap USD0.7b, CMP INR145, TP INR158, 9% Upside, Neutral)
Brief view on results and stock
- Jyothy Labroratories' (JYL) 3QFY20 results were disappointing on all fronts. According to management, part of the impact was due to unusually low off-take in the CDS channel, which should normalize in the next quarter.
- With weak earnings growth expectations even on a low base and low RoEs compared to peers, we believe that valuations, while at discount to peers, are justified. Maintain Neutral rating.
Substantial miss on our estimates
- 3QFY20 standalone net sales were down 6.2% YoY to INR4.1b (v/s est. INR4.9b). EBITDA declined 9.3% YoY to INR651m (v/s est. INR885m). PBT declined 24% YoY to INR441m (v/s est. INR704m). Adj. PAT declined 12.1% YoY to INR425m (v/s est. INR563m).
- Gross margins expanded 230bp YoY to 47.7%. High ad-spends as % of sales (+50bp YoY to 6%), increase in staff cost (+220bp YoY to 12.8%) and high other expenses (+20bp YoY to 12.9%), meant that EBITDA margins contracted 50bp YoY to 16% (v/s est. 18%).
- volumes declined 5.6% in 3QFY20.
- segmental: Fabric care/Personal care/other product sales declined 11%/11.7%/5.9%. Household Insecticides (HI) and Dishwashing sales were up 1.7% and 0.2%, respectively.
- Fabric care/ HI/ Personal care margins contracted 30bp/ 240bp/ 470bp to 21.2%/-2.4%/ 21.8% YoY. Dishwashing/other product margins expanded 220bp /90bp to 15.8%/-9.8% YoY.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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