MOSL: JYOTHY LABORATORIES (Neutral)-Double-digit sales decline across segments-2QFY18 showing signs of recovery
​Jyothy Laboratories: Double-digit sales decline across segments; 2QFY18 showing signs of recovery
(JYL IN, Mkt Cap USD1.1b, CMP INR383, TP INR395, 3% Upside, Neutral)
- Consol. net sales declined 16.1% YoY to INR3.6b (est. of +4%), with Power brand sales down 16.3% YoY. EBITDA fell by 45.9% YoY (est. of -7.5%) to INR437m and PAT by 53.6% YoY (est. of -11.1%) to INR206m.
- Consol. gross margin expanded 330bp YoY to 51.6%, better than our estimate of 190bp contraction. However, with a massive sales decline, operating costs rose sharply as % of sales. Staff costs (+220bp YoY), A&P (+470 bp) and other expenses (+320bp) were all up sharply, which meant that consolidated EBITDA margin contraction was 680bp YoY to 12.2% (est. of 16.2%).
- Segmental: Fabric care declined by 15.0% YoY, Dishwashing by 14.2% YoY, Personal care by 18% YoY and Household insecticides by 19.3% YoY.
- Concall highlights: 1) Kerala (17% of total sales) saw a 31% YoY decline in sales in 1QFY18 – JYL was not able to sell anything in the state in June. Rest of India sales fell 7% YoY in 1QFY18, in line with peers. 2) July saw 18% YoY growth in General trade, with Kerala up 12%. CSD and Modern trade still saw a 25% decline, which meant that July sales were up 6%. 3) From September quarter, 8-10% volume growth is likely and 10-12% going forward. 4) Gross margin will expand 200bp YoY, and EBITDA margin will range from 15-16% for FY18.
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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