MOSL: JYOTHY LABORATORIES (Neutral)-Healthy rural growth in the offing-No update on Henkel deal yet
​Jyothy Laboratories: Healthy rural growth in the offing; No update on Henkel deal yet
(JYL IN, Mkt Cap USD1.1b, CMP INR375, TP INR395, 5% Upside, Neutral)
We met Rajnikant Sabnavis, COO of Jyothy Labs (JYL). Key takeaways:
- Management stated its intention to preserve the existing culture at JYL even after the potential acquisition of equity share capital by German consumer giant Henkel.
- The company has not yet decided the mode of allowing Henkel an entry if the latter decides to exercise its stake acquisition option ahead of the 31 October 2017 deadline.
- JYL reaches 824,000 outlets directly, expanding at 20-25% every year. It will continue growing its direct reach at the same pace.
- Monsoons are by and large on track. Management expects rural demand to pick up over the next 12 months. However, for any large spike in urban demand, massive job creation needs to happen there, the visibility of which appears low as of now.
- There is no material change to our forecasts. As we are also maintaining our target multiple of 22x June 2019E EV/EBITDA, there is no change to our target price or Neutral rating either.
No update on Henkel deal yet, will maintain status quo in JYL’s working culture
- ​There is no update on the Henkel deal yet.
- Management stated its intention to preserve the existing culture at JYL even after the potential acquisition of equity share capital by Henkel.
- Henkel knows that JYL has done a far better job compared to them in India, and thus, would not want to upset the applecart.
- For Henkel globally, the focus under the new CEO is on the B2B business anyway.
- The company has not yet decided the mode of allowing Henkel an entry if the latter decides to exercise the stake acquisition option ahead of the 31 October deadline. It could be a fresh issue or part sale of shares by the promoters, who have around 67% stake in the company.
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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