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Jyothy Laboratories Ltd. (JLL), a company having three brands, is set to transform
into a multi-brand company with the acquisition of an 83.7% stake in Henkel
India (Henkel), which owns seven brands. As a result of this synergy, we expect
JLL’s consolidated revenue to post a CAGR of 35% to `1,627cr and profit to post
a CAGR of 36% to `166cr over FY2011-14E. We initiate coverage on JLL with a
Buy recommendation and a target price of `248, based on SOTP valuation.
Investment rationale
Turnaround of Henkel – A bright future for JLL
JLL acquired an 83.7% stake in Henkel in August 2011. Management is now
planning various turnaround strategies for Henkel, such as a new management,
revamping of all its brands and shifting its manufacturing to JLL’s units. We expect
Henkel’s turnaround to result in profit of `19cr in FY2014E.
Jyothy Fabricare Services Ltd. (JFSL) – A long-term growth driver
We expect JFSL, JLL’s subsidiary engaged in the laundry business, to post a
102.4% CAGR in its revenue to `193cr over FY2012E-14E with an operating
margin of 26.1% in FY2014E. Further, JFSL is expected to reach its breakeven
and start yielding profit from FY2013E, registering a profit of `30cr in FY2014E.
Outlook and valuation
We expect JLL’s consolidated revenue to post a CAGR of 35% to `1,627cr and
profit to post a CAGR of 36% to `166cr over FY2011-14E. We initiate coverage
on JLL with a Buy rating view and an SOTP target price of `248.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jyothy Laboratories Ltd. (JLL), a company having three brands, is set to transform
into a multi-brand company with the acquisition of an 83.7% stake in Henkel
India (Henkel), which owns seven brands. As a result of this synergy, we expect
JLL’s consolidated revenue to post a CAGR of 35% to `1,627cr and profit to post
a CAGR of 36% to `166cr over FY2011-14E. We initiate coverage on JLL with a
Buy recommendation and a target price of `248, based on SOTP valuation.
Investment rationale
Turnaround of Henkel – A bright future for JLL
JLL acquired an 83.7% stake in Henkel in August 2011. Management is now
planning various turnaround strategies for Henkel, such as a new management,
revamping of all its brands and shifting its manufacturing to JLL’s units. We expect
Henkel’s turnaround to result in profit of `19cr in FY2014E.
Jyothy Fabricare Services Ltd. (JFSL) – A long-term growth driver
We expect JFSL, JLL’s subsidiary engaged in the laundry business, to post a
102.4% CAGR in its revenue to `193cr over FY2012E-14E with an operating
margin of 26.1% in FY2014E. Further, JFSL is expected to reach its breakeven
and start yielding profit from FY2013E, registering a profit of `30cr in FY2014E.
Outlook and valuation
We expect JLL’s consolidated revenue to post a CAGR of 35% to `1,627cr and
profit to post a CAGR of 36% to `166cr over FY2011-14E. We initiate coverage
on JLL with a Buy rating view and an SOTP target price of `248.
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