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JYL’s Q4FY12 revenue was ahead of estimates led by better than expected performance from Maxo, which led to EBITDA beat as higher revenue led to almost break even for Maxo vs. PBIT loss of 9.7% in Q3. However, cost pressures (rising crude prices, guar gum prices and depreciating INR) were clearly visible with gross margin at 39.5% lowest since it listed in Dec’07. PAT was largely in line led by higher than expected interest expense at Rs134 mn (interest on loan taken from Axis Bank) vs. IDBIe Rs26 mn and Rs23 mn in Q3. Management indicated that sales momentum across brands in core business has improved QoQ and operations have largely stabilized as large part of distribution realignment is completed. Volume growth in both Fabric care and Exo (84% value growth, 75% volume growth) aided revenue growth. Even Maxo was strong at xx%, thereby showing early signs of revival in the growth trajectory. Management expects volume traction in Fabric care and Exo to continue led by ongoing brand building exercise, strong brand equity and completion of distribution realignment. In case of Maxo, mgt’s focus on liquids as also new TV commercial (to be telecast soon) will likely boost volumes, with growth rate aided by lower base (~1% growth in FY12). Management expects volume growth of 20-25% in JYL in FY13 (we factor in 15.4% growth). Henkel India (HIL) continues its improved performance with EBITDA margin at 13.4% in Q4FY12 from -6.8% in Q4FY11 (JYL took over HIL in Mar’11). Moreover, with Karaikkal strike (where Henko Champion is manufactured) being resolved on Dec 26, 2011 (strike resulted in revenue/EBITDA loss of Rs270 mn/Rs70 mn, with EBITDA to 3.1%), revenue is back to quarterly run rate in excess of Rs1 bn and EBITDA margin at >14%. Management expects 25-40% vol. growth in FY13 with EBITDA margin sustainable at ~15%, led by price hike of 8-12% across brands in Apr’12; however, arrested by uptick in A&P spends (TV commercials on Margo and Pril to be telecast soon). We raise FY13 revenue estimates by 4% (to factor in strong volume performance, especially in Maxo) and up EBITDA margin estimate by 30bps to 13.8% (mgt estimates ~16% OPM as sustainable; however, we are conservative led by crude/INR related cost pressures). However, our interest estimate goes up, resulting in earnings maintained at Rs10.9. Introduce FY14 estimates with revenue/EBITDA/EPS at Rs8.9 bn/Rs1.3 bn/Rs10.2 – up 16%/19%/down 6%. EPS is estimated to be down 6% as we estimate full tax from FY14 onwards (MAT credit available till FY13). Key takeaway from Q4 results was the appointment of Mr. S Raghunandan as the Chief Executive Officer and Whole Time Director of the company. Mr. Raghunandan has served as Managing Director with Reckitt Benckiser India and also worked at senior mgt level at leading FMCG companies like Paras Pharma, Dabur India and HUL, etc. We believe this is a step in the right direction and was much needed considering the large bouquet of brands under JYL + Henkel. In our view, this move should start reaping benefits in HIL over next 3-6 months. Reiterate BUY with SOTP valuation at Rs241 – JYL’s core business at Rs190; 84% stake in HIL at Rs36 (16x CY13E EPS of Rs2.2) and NPV of tax benefits on HIL’s accumulated losses of >Rs5 bn at Rs15. Management has categorically denied any near term possibility of stake dilution as also asset monetization, which will keep debt at elevated levels.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
JYL’s Q4FY12 revenue was ahead of estimates led by better than expected performance from Maxo, which led to EBITDA beat as higher revenue led to almost break even for Maxo vs. PBIT loss of 9.7% in Q3. However, cost pressures (rising crude prices, guar gum prices and depreciating INR) were clearly visible with gross margin at 39.5% lowest since it listed in Dec’07. PAT was largely in line led by higher than expected interest expense at Rs134 mn (interest on loan taken from Axis Bank) vs. IDBIe Rs26 mn and Rs23 mn in Q3. Management indicated that sales momentum across brands in core business has improved QoQ and operations have largely stabilized as large part of distribution realignment is completed. Volume growth in both Fabric care and Exo (84% value growth, 75% volume growth) aided revenue growth. Even Maxo was strong at xx%, thereby showing early signs of revival in the growth trajectory. Management expects volume traction in Fabric care and Exo to continue led by ongoing brand building exercise, strong brand equity and completion of distribution realignment. In case of Maxo, mgt’s focus on liquids as also new TV commercial (to be telecast soon) will likely boost volumes, with growth rate aided by lower base (~1% growth in FY12). Management expects volume growth of 20-25% in JYL in FY13 (we factor in 15.4% growth). Henkel India (HIL) continues its improved performance with EBITDA margin at 13.4% in Q4FY12 from -6.8% in Q4FY11 (JYL took over HIL in Mar’11). Moreover, with Karaikkal strike (where Henko Champion is manufactured) being resolved on Dec 26, 2011 (strike resulted in revenue/EBITDA loss of Rs270 mn/Rs70 mn, with EBITDA to 3.1%), revenue is back to quarterly run rate in excess of Rs1 bn and EBITDA margin at >14%. Management expects 25-40% vol. growth in FY13 with EBITDA margin sustainable at ~15%, led by price hike of 8-12% across brands in Apr’12; however, arrested by uptick in A&P spends (TV commercials on Margo and Pril to be telecast soon). We raise FY13 revenue estimates by 4% (to factor in strong volume performance, especially in Maxo) and up EBITDA margin estimate by 30bps to 13.8% (mgt estimates ~16% OPM as sustainable; however, we are conservative led by crude/INR related cost pressures). However, our interest estimate goes up, resulting in earnings maintained at Rs10.9. Introduce FY14 estimates with revenue/EBITDA/EPS at Rs8.9 bn/Rs1.3 bn/Rs10.2 – up 16%/19%/down 6%. EPS is estimated to be down 6% as we estimate full tax from FY14 onwards (MAT credit available till FY13). Key takeaway from Q4 results was the appointment of Mr. S Raghunandan as the Chief Executive Officer and Whole Time Director of the company. Mr. Raghunandan has served as Managing Director with Reckitt Benckiser India and also worked at senior mgt level at leading FMCG companies like Paras Pharma, Dabur India and HUL, etc. We believe this is a step in the right direction and was much needed considering the large bouquet of brands under JYL + Henkel. In our view, this move should start reaping benefits in HIL over next 3-6 months. Reiterate BUY with SOTP valuation at Rs241 – JYL’s core business at Rs190; 84% stake in HIL at Rs36 (16x CY13E EPS of Rs2.2) and NPV of tax benefits on HIL’s accumulated losses of >Rs5 bn at Rs15. Management has categorically denied any near term possibility of stake dilution as also asset monetization, which will keep debt at elevated levels.
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