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Jyothy Laboratories
Weak performance; reiterate Hold
Jyothy Labs reported weak 3QFY11 results, with net profit
growing only 0.3%. Home Care revenue declined 11%,
registering losses. With lack of clarity on acquisitions, we expect
the stock’s price performance to remain muted. Reiterate Hold.
Home Care reports revenue decline. The company reported
revenue growth of 11% yoy, of which 6% comprised volume
growth and the remaining price hikes. The soaps & detergents
segment registered revenue growth of 21%, but the homecare
segment saw revenue decline of 11% post cut in trade margin.
Higher ad spend impacts margin. The company’s EBITDA
margin was lower 230bps yoy. Increase in ad spend after launch of
detergents and aggressive brand building activities impacted the
margin. Net profit was up only 0.3%. The company’s other
income was higher as it has free reserves post its QIP.
No firm acquisitions plans. The company had raised `2.3bn as
QIP for acquisitions. However, it indicated that it is not able to
close the deals and has invested the QIP money in bank deposits.
Also, it is looking to raise `1bn in its 75% subsidiary – Jyothy
Fabricare Services – to fund its capex plans.
Valuation and risks. We retain our Hold rating with Mar ’11e
price target of `300, based on DCF method. At our target price
and FY12e earnings, the PE is 26x. Key upside risk: less
competition; key downside risk: higher raw material prices.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Jyothy Laboratories
Weak performance; reiterate Hold
Jyothy Labs reported weak 3QFY11 results, with net profit
growing only 0.3%. Home Care revenue declined 11%,
registering losses. With lack of clarity on acquisitions, we expect
the stock’s price performance to remain muted. Reiterate Hold.
Home Care reports revenue decline. The company reported
revenue growth of 11% yoy, of which 6% comprised volume
growth and the remaining price hikes. The soaps & detergents
segment registered revenue growth of 21%, but the homecare
segment saw revenue decline of 11% post cut in trade margin.
Higher ad spend impacts margin. The company’s EBITDA
margin was lower 230bps yoy. Increase in ad spend after launch of
detergents and aggressive brand building activities impacted the
margin. Net profit was up only 0.3%. The company’s other
income was higher as it has free reserves post its QIP.
No firm acquisitions plans. The company had raised `2.3bn as
QIP for acquisitions. However, it indicated that it is not able to
close the deals and has invested the QIP money in bank deposits.
Also, it is looking to raise `1bn in its 75% subsidiary – Jyothy
Fabricare Services – to fund its capex plans.
Valuation and risks. We retain our Hold rating with Mar ’11e
price target of `300, based on DCF method. At our target price
and FY12e earnings, the PE is 26x. Key upside risk: less
competition; key downside risk: higher raw material prices.
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