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Jyothy Laboratories (JLL) is all set to expand its foothold in the
fabricare segment. JLL has acquired a 14.9% stake in Henkel India Ltd
from Tamil Nadu Petro Products Ltd (TNPL) in an all-cash deal worth |
60.73 crore and acquired a 100% stake in Delhi-based Diamond Fab
Care (DFC) for | 30 crore. The acquisitions are synergistic to JLL as
Henkel and Jyothy have a synergistic portfolio (with both being present
in fabric care, dish wash, personal care and the household care
segments) and DFC would help it to expand its foothold in the laundry
care business in the Delhi NCR region.
Details of the Henkel deal
JLL has acquired the 14.9% stake from TNPL (having 17% stake) at | 35
per share (~22% discount to the CMP of | 45). It is an all-cash deal and
would be funded through internal accruals. Further, JLL is planning to
participate in the bidding of 50.9% stake sale of Henkel AG in Henkel India
for its homecare and personal care brands, namely, Henko, Mr White,
Chek, Pril, Fa, Neem and Margo.
Details of Diamond Fab Care deal
JLL has acquired a 100% stake in Delhi-based DFC Services for ~| 30
crore. The acquisition is to be funded by money (| 100 crore) raised
through a 26% stake sale of JFSL to IL&FS PE fund. DFC is a Delhi NCR
based laundry services company that caters both to retail as well as
institutional clients and has a total turnover of ~| 10 crore.
Valuation
At the CMP of | 205, the stock is trading at 18.5x its FY11E EPS of | 11.1
and 15.6x its FY12E EPS of | 13.2. We believe the strategic investments
are synergistic for JLL. However, the acquisition of the 51% stake in
Henkel would be a challenge for it as Henkel’s margins are very low and it
has a debt of ~| 455 crore on its books. Moreover, JLL would have to
invest huge funds in rebranding and relaunching Henkel’s products that
could further pressurise margins. Hence, we are revising our target price
to | 244 valuing JLL at 19x its FY12E EPS of | 13.2 with a BUY rating.
Diamond Fab Care (DFC)
DFC is a Delhi-based laundry services firm with 36 fabric care stores
across Delhi, Gurgaon, Ghaziabad, Faridabad and Noida. The company is
as old as JFSL (started operations around November, 2009) with a total
turnover of around | 10 crore. Like JLL, it caters both to retail (60% of
sales) and institutional clients (40% of sales).
JLL plans to complete the acquisition of DFC by March, 2011 and
consolidate its accounts from April, 2011 onwards. With DFC having
achieved break even this year, we believe JFSL would not face any
pressure on the operational front. Further, JLL has plans to further
increase the number of stores in Delhi under its own brand name (JFSL)
and gradually transform the DFC stores under the JFSL brand.
With DFC operating at ~60% margins in the retail segment, ~15% margin
in the institutional segment and having achieved its break even within 1.5
years of operation we believe the company has received a good response
from its clients. Hence, the acquisition seems to be a positive for the JFSL
business.
Henkel India Limited
Henkel India is the subsidiary of Henkel AG, the Germany based
company, which holds 50.97% stake in the company. The public and
institutions hold 32.33% and TNPL holds 16.7% (before JLL’s purchase).
The company’s major brands in India are Henko detergent, Chek
detergent, Mr White detergent, Neem toothpaste, Fa, Margo soap, Pril
dish wash products and Schwarzkopf professional hair care business. The
company is planning to exit all its business except Schwarzkopf.
With Henkel’s performance being subdued over the years, the acquisition
of the 51% stake would require the company to revamp its operations
completely. Also, huge expenses would be required for re-building the
existing brands in order to maintain sales growth. However, the major
concern that remains is the debt of | 455 crore on Henkel’s balance sheet,
which could continue to keep the bottomline under pressure in the wake
of already higher expenses and strained margins.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jyothy Laboratories (JLL) is all set to expand its foothold in the
fabricare segment. JLL has acquired a 14.9% stake in Henkel India Ltd
from Tamil Nadu Petro Products Ltd (TNPL) in an all-cash deal worth |
60.73 crore and acquired a 100% stake in Delhi-based Diamond Fab
Care (DFC) for | 30 crore. The acquisitions are synergistic to JLL as
Henkel and Jyothy have a synergistic portfolio (with both being present
in fabric care, dish wash, personal care and the household care
segments) and DFC would help it to expand its foothold in the laundry
care business in the Delhi NCR region.
Details of the Henkel deal
JLL has acquired the 14.9% stake from TNPL (having 17% stake) at | 35
per share (~22% discount to the CMP of | 45). It is an all-cash deal and
would be funded through internal accruals. Further, JLL is planning to
participate in the bidding of 50.9% stake sale of Henkel AG in Henkel India
for its homecare and personal care brands, namely, Henko, Mr White,
Chek, Pril, Fa, Neem and Margo.
Details of Diamond Fab Care deal
JLL has acquired a 100% stake in Delhi-based DFC Services for ~| 30
crore. The acquisition is to be funded by money (| 100 crore) raised
through a 26% stake sale of JFSL to IL&FS PE fund. DFC is a Delhi NCR
based laundry services company that caters both to retail as well as
institutional clients and has a total turnover of ~| 10 crore.
Valuation
At the CMP of | 205, the stock is trading at 18.5x its FY11E EPS of | 11.1
and 15.6x its FY12E EPS of | 13.2. We believe the strategic investments
are synergistic for JLL. However, the acquisition of the 51% stake in
Henkel would be a challenge for it as Henkel’s margins are very low and it
has a debt of ~| 455 crore on its books. Moreover, JLL would have to
invest huge funds in rebranding and relaunching Henkel’s products that
could further pressurise margins. Hence, we are revising our target price
to | 244 valuing JLL at 19x its FY12E EPS of | 13.2 with a BUY rating.
Diamond Fab Care (DFC)
DFC is a Delhi-based laundry services firm with 36 fabric care stores
across Delhi, Gurgaon, Ghaziabad, Faridabad and Noida. The company is
as old as JFSL (started operations around November, 2009) with a total
turnover of around | 10 crore. Like JLL, it caters both to retail (60% of
sales) and institutional clients (40% of sales).
JLL plans to complete the acquisition of DFC by March, 2011 and
consolidate its accounts from April, 2011 onwards. With DFC having
achieved break even this year, we believe JFSL would not face any
pressure on the operational front. Further, JLL has plans to further
increase the number of stores in Delhi under its own brand name (JFSL)
and gradually transform the DFC stores under the JFSL brand.
With DFC operating at ~60% margins in the retail segment, ~15% margin
in the institutional segment and having achieved its break even within 1.5
years of operation we believe the company has received a good response
from its clients. Hence, the acquisition seems to be a positive for the JFSL
business.
Henkel India Limited
Henkel India is the subsidiary of Henkel AG, the Germany based
company, which holds 50.97% stake in the company. The public and
institutions hold 32.33% and TNPL holds 16.7% (before JLL’s purchase).
The company’s major brands in India are Henko detergent, Chek
detergent, Mr White detergent, Neem toothpaste, Fa, Margo soap, Pril
dish wash products and Schwarzkopf professional hair care business. The
company is planning to exit all its business except Schwarzkopf.
With Henkel’s performance being subdued over the years, the acquisition
of the 51% stake would require the company to revamp its operations
completely. Also, huge expenses would be required for re-building the
existing brands in order to maintain sales growth. However, the major
concern that remains is the debt of | 455 crore on Henkel’s balance sheet,
which could continue to keep the bottomline under pressure in the wake
of already higher expenses and strained margins.
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