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D i s t r i b u t i o n r e a l i g nm e nt h i t s s a l e s g r o w t h …
Jyothy Laboratories Limited (JLL) reported a dismal performance in
Q1FY12 with sales witnessing de-growth of ~19% YoY to | 123 crore
from | 175.7 crore in Q1FY11. According to the management, the
slowdown in sales in Q1FY12 was on account of a re-alignment in the
channel of distribution. However, we remain cautious on the growth
outlook of the core business with the previous quarter (Q4FY11) also
remaining subdued. Margins during the quarter were also considerably
lower at 8.7% against 20.8% in Q1FY11 on the back of higher costs on all
fronts. JLL’s raw material and employee cost increased ~300 bps each to
~52% and ~49% of net sales, respectively. Also, marketing expenses
increased ~120 bps to 7.5% of net sales during the quarter. The drag of
lower sales and margins pulled down the net profit to | 14 crore from |
25.7 crore in the corresponding quarter last year.
ƒ Highlight of the quarter
The company entered into a share purchase agreement with Henkel AG
for acquiring 50.97% equity share capital and 100% preference share
capital and agreed to discharge all loans and guarantees given by Henkel
AG to Henkel India Limited for a total consideration of | 616.5 crore. JLL
has also made an open offer to acquire the additional 20% shares from
the open market at an offer price of | 41.2/share.
V a l u a t i o n
Currently, the stock is trading at 26.6x and 24.3x its FY12 and FY13
estimated EPS of | 7.0 and | 7.7, respectively. As the company’s core
businesses has been underperforming for the last two quarters, we are
cautious on the growth outlook of the company as the segments in which
it is present (detergents and home-care) are already witnessing cut-throat
competition among large players (HUL & P&G). Moreover, the huge debt
on the company’s books, taken for Henkel’s acquisition could continue to
haunt earnings if growth is not revived. Hence, we value the stock at 21x
its FY13E EPS, assigning it a SELL rating with a target price of | 161.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
D i s t r i b u t i o n r e a l i g nm e nt h i t s s a l e s g r o w t h …
Jyothy Laboratories Limited (JLL) reported a dismal performance in
Q1FY12 with sales witnessing de-growth of ~19% YoY to | 123 crore
from | 175.7 crore in Q1FY11. According to the management, the
slowdown in sales in Q1FY12 was on account of a re-alignment in the
channel of distribution. However, we remain cautious on the growth
outlook of the core business with the previous quarter (Q4FY11) also
remaining subdued. Margins during the quarter were also considerably
lower at 8.7% against 20.8% in Q1FY11 on the back of higher costs on all
fronts. JLL’s raw material and employee cost increased ~300 bps each to
~52% and ~49% of net sales, respectively. Also, marketing expenses
increased ~120 bps to 7.5% of net sales during the quarter. The drag of
lower sales and margins pulled down the net profit to | 14 crore from |
25.7 crore in the corresponding quarter last year.
ƒ Highlight of the quarter
The company entered into a share purchase agreement with Henkel AG
for acquiring 50.97% equity share capital and 100% preference share
capital and agreed to discharge all loans and guarantees given by Henkel
AG to Henkel India Limited for a total consideration of | 616.5 crore. JLL
has also made an open offer to acquire the additional 20% shares from
the open market at an offer price of | 41.2/share.
V a l u a t i o n
Currently, the stock is trading at 26.6x and 24.3x its FY12 and FY13
estimated EPS of | 7.0 and | 7.7, respectively. As the company’s core
businesses has been underperforming for the last two quarters, we are
cautious on the growth outlook of the company as the segments in which
it is present (detergents and home-care) are already witnessing cut-throat
competition among large players (HUL & P&G). Moreover, the huge debt
on the company’s books, taken for Henkel’s acquisition could continue to
haunt earnings if growth is not revived. Hence, we value the stock at 21x
its FY13E EPS, assigning it a SELL rating with a target price of | 161.
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