MOSL: JYOTHY LABORATORIES (Neutral)-Henkel option agreement lapsed-operating performance below expectation
​Jyothy Laboratories: Henkel option agreement lapsed; operating performance below expectation
(JYL IN, Mkt Cap USD1.5b, CMP INR336, TP INR365, 9% Upside, Neutral)
- Consol. net sales grew 4.3% YoY to INR4.3b. Reported power brand sales grew just 0.8% YoY. EBITDA rose 11.3% YoY to INR709m (est. of INR741m). Adj. PAT after non-controlling interest (NCI) grew 48.5% YoY to INR476m (est. of INR476m). Fabric care and Mosquito repellent fell 6.2% and 4.4% YoY, respectively. Dishwashing segment was flat and Personal care grew 38.9% YoY.
- Consol. gross margin contracted 90bp YoY to 48.1%. Other expenses declined sharply by 230bp YoY, while staff costs and A&P rose 10bp and 40bp, respectively. Thus, consolidated EBITDA margin expanded 100bp YoY to 16.5%.
- Concall highlights: 1) Consumer demand showing signs of pick-up, especially in rural market. Rural growth across India has been mostly strong for the company, barring a few districts that received low rains. 2) JYL witnessed strong 19% YoY sales growth in October, after 10% like-to-like growth in 2QFY18. Primary and secondary sales were largely similar for this period. 3) Mutually exploring options with Henkel to work together. Erstwhile agreements on Fa and Pril will continue. However, the period for stake purchase has expired. 4) Management expects close to double-digit volume growth in 2HFY18, with ~15% sales growth and a 16% EBITDA margin.
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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