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Another ‘hit and miss’ quarter. Jyothy Labs’ (JYL) 3QFY15 results disappointed us, on balance, despite a couple of bright spots. Headline revenues, EBITDA and adjusted PAT came in 4-7% below our expectations as strong performance in Maxo and Henko proved inadequate to make up for the subdued performance of Ujala, Margo and smaller brands. We continue to value JYL on fundamentals, i.e. without baking in probabilistic upside from the potential stake sale to Henkel. The stock remains expensive on fundamentals and we retain our REDUCE rating with an unchanged TP of `250.
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3QFY15 consolidated financials miss expectations JYL reported another below-expectations quarter. Consolidated revenues of `3.56 bn, +14% yoy, came in 4% lower than our estimates. EBITDA of `440 mn (+8% yoy) and adjusted recurring PAT (pre-ESOP charges and adjusted for one-off gain of `37 mn – credit note received from GAIL for prior period; reported in other operating income) of `345 mn (+52% yoy; growth largely optical as aided by conversion of term loans to NCD) missed our expectations by 4% and 7%, respectively. For 9MFY15, JYL’s revenues are up 15% yoy, EBITDA is up a modest 7% yoy, and adjusted PAT is up 70% yoy (again largely optical). Even as the revenue growth rates are fine in the context of a challenging industry demand environment, we (and most of the Street) have higher expectations from the new management team, especially in the backdrop of sharp increase in A&SP expenses and natural gains from larger distribution base post Henkel acquisition (especially for the Henkel portfolio). Segmental performance – Maxo shines, Margo disappoints JYL’s ‘hit and miss’ performance continued as far as segmental and brand-wise performance is concerned. We do appreciate that not every segment and every brand can perform every quarter. As far as 3QFY15 is concerned, it was a strong quarter for the company’s mosquito repellant brand Maxo (11% of 3QFY15 sales), which grew a strong 48% yoy. Personal care segment revenues were down 6% yoy primarily on account of a weak quarter for Margo, JYL’s largest personal care brand. Margo volumes declined 3% yoy; JYL attributed weak Margo performance to supply issues on Margo Glycerin, the key winter variant. Fabric care (Ujala, Henko, etc.) and dishwash (Exo, Pril, etc.) had a decent quarter, growing 14% and 13% yoy, respectively. Within fabric care, Henko grew a healthy 29% yoy while Ujala growth was a subdued 7% (+1% volumes). Stock expensive on fundamentals; we do not ascribe any value to the Henkel option yet We have cut our EBITDA and EPS estimates for FY2016-17E by 2-3% and 5-6%, respectively, to bake in lower sales growth. Our EBITDA margin expectations of around 15% are ahead of management guidance. Retain REDUCE with an unchanged TP of `250 (23X Dec 2016E EPS)
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily29012015tg.pdf
Another ‘hit and miss’ quarter. Jyothy Labs’ (JYL) 3QFY15 results disappointed us, on balance, despite a couple of bright spots. Headline revenues, EBITDA and adjusted PAT came in 4-7% below our expectations as strong performance in Maxo and Henko proved inadequate to make up for the subdued performance of Ujala, Margo and smaller brands. We continue to value JYL on fundamentals, i.e. without baking in probabilistic upside from the potential stake sale to Henkel. The stock remains expensive on fundamentals and we retain our REDUCE rating with an unchanged TP of `250.
�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��
��
3QFY15 consolidated financials miss expectations JYL reported another below-expectations quarter. Consolidated revenues of `3.56 bn, +14% yoy, came in 4% lower than our estimates. EBITDA of `440 mn (+8% yoy) and adjusted recurring PAT (pre-ESOP charges and adjusted for one-off gain of `37 mn – credit note received from GAIL for prior period; reported in other operating income) of `345 mn (+52% yoy; growth largely optical as aided by conversion of term loans to NCD) missed our expectations by 4% and 7%, respectively. For 9MFY15, JYL’s revenues are up 15% yoy, EBITDA is up a modest 7% yoy, and adjusted PAT is up 70% yoy (again largely optical). Even as the revenue growth rates are fine in the context of a challenging industry demand environment, we (and most of the Street) have higher expectations from the new management team, especially in the backdrop of sharp increase in A&SP expenses and natural gains from larger distribution base post Henkel acquisition (especially for the Henkel portfolio). Segmental performance – Maxo shines, Margo disappoints JYL’s ‘hit and miss’ performance continued as far as segmental and brand-wise performance is concerned. We do appreciate that not every segment and every brand can perform every quarter. As far as 3QFY15 is concerned, it was a strong quarter for the company’s mosquito repellant brand Maxo (11% of 3QFY15 sales), which grew a strong 48% yoy. Personal care segment revenues were down 6% yoy primarily on account of a weak quarter for Margo, JYL’s largest personal care brand. Margo volumes declined 3% yoy; JYL attributed weak Margo performance to supply issues on Margo Glycerin, the key winter variant. Fabric care (Ujala, Henko, etc.) and dishwash (Exo, Pril, etc.) had a decent quarter, growing 14% and 13% yoy, respectively. Within fabric care, Henko grew a healthy 29% yoy while Ujala growth was a subdued 7% (+1% volumes). Stock expensive on fundamentals; we do not ascribe any value to the Henkel option yet We have cut our EBITDA and EPS estimates for FY2016-17E by 2-3% and 5-6%, respectively, to bake in lower sales growth. Our EBITDA margin expectations of around 15% are ahead of management guidance. Retain REDUCE with an unchanged TP of `250 (23X Dec 2016E EPS)
LINK
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily29012015tg.pdf
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