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India Equity Research Reports, IPO and Stock News
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What’s the theme?
Following the Henkel India acquisition, we expect numerous positives for Jyothy in the medium to long
term that would improve profitability. Jyothy is among the few companies in the FMCG space which has
immense potential for long-term profitability.
What will move the stock?
1) The acquisition of Henkel India added 4-5 established brands that improved Jyothy's sales mix; 2) Full
impact of the price increase of Ujala Supreme will support revenue and profitability growth; 3) Maxo Military
will add Rs600mn and Rs700mn revenue in FY12 and FY13 respectively; 4) We expect improvement in
profitability in Henkel India; 5) Debt restructuring can lead to higher profits; 6) Merger of Jyothy and
Henkel India will engender massive tax benefits of Rs1.2bn.
Where are we stacked versus consensus?
Our estimates for FY13 are among the highest on the street, led by expectation of profitability improvement
in Henkel India and 50% debt repayment during FY13. We assign 16x to FY13 earnings and add Rs12/
share NPV on tax saving of Rs1.2bn @12% discount rate to derive the TP of Rs265.
What will challenge our target price?
1) Change in our estimates for input costs owing to volatility in crude prices; 2) Inability to attract retail clients in
the laundry business; 3) Higher brand building investments; and 4) Any delay in operational improvement in
Henkel will start impacting the overall profitability.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
What’s the theme?
Following the Henkel India acquisition, we expect numerous positives for Jyothy in the medium to long
term that would improve profitability. Jyothy is among the few companies in the FMCG space which has
immense potential for long-term profitability.
What will move the stock?
1) The acquisition of Henkel India added 4-5 established brands that improved Jyothy's sales mix; 2) Full
impact of the price increase of Ujala Supreme will support revenue and profitability growth; 3) Maxo Military
will add Rs600mn and Rs700mn revenue in FY12 and FY13 respectively; 4) We expect improvement in
profitability in Henkel India; 5) Debt restructuring can lead to higher profits; 6) Merger of Jyothy and
Henkel India will engender massive tax benefits of Rs1.2bn.
Where are we stacked versus consensus?
Our estimates for FY13 are among the highest on the street, led by expectation of profitability improvement
in Henkel India and 50% debt repayment during FY13. We assign 16x to FY13 earnings and add Rs12/
share NPV on tax saving of Rs1.2bn @12% discount rate to derive the TP of Rs265.
What will challenge our target price?
1) Change in our estimates for input costs owing to volatility in crude prices; 2) Inability to attract retail clients in
the laundry business; 3) Higher brand building investments; and 4) Any delay in operational improvement in
Henkel will start impacting the overall profitability.
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