Q4FY17 RESULT UPDATE

RETAIL EQUITY RESEARCH

Jyothy Laboratories Ltd HOLD
Fast Moving Consumer Goods Rating as per Midcap 12months investment period
BSE CODE:532926 NSE CODE: JYOTHYLAB
CMP Rs373 TARGET Rs394 RETURN 6%
Bloomberg CODE: JYL:IN SENSEX: 30,365

24th May, 2017

Company Data
Emerging from slowdown... Market Cap (cr) Rs6,773
Jyothy Laboratories Ltd (JLL) is an Indian FMCG player with Enterprise Value (cr) Rs7,323
products across Fabric care, Dishwashing, Mosquito repellents &
Outstanding Shares (cr) 18.2
Personal Care.
Free Float 33%
JLLs revenue grew at muted 4%YoY in Q4FY17 impacted by
Dividend Yield 1.6%
demonetisation and muted price growth.
EBITDA margins contracted 90bps YoY due to 190bps YoY reduction in 52 week high Rs427
gross margins on muted price growth. 52 week low Rs270
We reduce our FY18E revenue forecasts by 5% factoring the 6m average volume (cr) 0.01
demonetisation, while we expect revival in demand will drive revenue Beta 0.6
to grow at 11% CAGR over FY17-19E. Face value Rs1
EBITDA margins will face medium term headwinds, but once price Shareholding % Q2FY17 Q3FY17 Q4FY17
hikes return with recovery in demand will help in 67bps expansion in Promoters 66.9 66.9 66.9
margins and 25% CAGR in PAT over FY17E-19E. FIIs 13.1 13.3 13.4
We rollover our valuation to FY19E and revise upwards our target price
MFs/Insti 9.7 10.9 9.6
to 394 valuing at 23x FY19E EV/EBITDA, and upgrade our rating from
Public 10.3 8.9 10.1
reduce to hold.
Total 100.0 100.0 100.0
Revenue revival in picture...
Q4FY17 revenue grew 4%YoY, impacted by 6% YoY de-growth in household Price Performance 3mth 6mth 1 Year
insecticides segment due to disruptions from demonetisation. Volume growth
Absolute Return 5.1% 9.4% 24.7%
was healthy at 10% YoY in other segments (excluding household insecticides). We
Absolute Sensex 5.2% 17.4% 20.4%
expect a revival in consumer sentiments from H2FY18E, coupled with products
gaining traction into newer geographies to drive revenue momentum. Factoring Relative Return* -0.1% -8.0% 4.4%
*over or under performance to benchmark index
the demonetisation impact, we marginally reduce our FY18E revenue estimates by
5%, while factor 10% CAGR in revenue over FY17-19E.
400 JLL Sensex rebased
Operating profitability...room for expansion
EBITDA margins contracted 90bps YoY on 190bps reduction in gross margins. 350
Q4FY17 PAT grew 900% YoY due to tax reversals, while pre-tax profit grew
300
9%YoY. Absence of price growth has been impacting the Gross margin and
EBITDA in recent quarters. JLL has initiated price hikes in Q4FY17, but 250
inadequate to overcome the gross margin pressures. Price growth is expected to May 16 Aug 16 Nov 16 Feb 17 May 17
be muted in few more quarters before demand recovery. Margins are expected to
remain stable in FY18E while expected to improve 67bps over FY17-19E. Consolidated (Rs.cr) FY17E FY18E FY19E
Sales 1,749 1,878 2,106
Products gaining traction...
JLL has been focusing on expanding its product pipeline across the country. Growth (%) 5.4 7.4 12.1
Successful regional brands in its product line have the potential to grow national. EBITDA 257 278 323
Product re-launches and new products within the key categories will help gain Margin(%) 14.7 14.8 15.4
market share. Fabric care and Dishwashing will be the key growth segments PAT Adj 145 175 215
which would see gaining market share in the coming years. Growth (%) 54.9 20.9 22.8
Valuations Adj.EPS 8.0 9.6 11.8
JLL is currently trading at 26x one yr forward EV/EBITDA. German FMCG major Growth (%) 54.9 20.9 22.8
Henkels option to buy upto 26% equity in JLL will be watchful. An exercise of
P/E 46.8 38.7 31.5
this option could trigger additional inflow of funds through equity and improve
balance sheet, while we have not factored this in our estimates. We rollover our P/B 6.3 5.9 5.4
valuation to FY19E EV/EBITDA, at 23x upgrade our rating from Reduce to Hold EV/EBITDA 26.6 25.8 21.8
with a revised target price of Rs394. RoE (%) 15.0 15.7 17.8
D/E 0.5 0.4 0.3

Anil R
Analyst
Financials (Consolidated)
Profit & Loss Account
(Rs cr) Q4FY17 Q4FY16 YoY Growth % Q3FY17 QoQ Growth %
Net Revenue 466.1 448.9 3.8 398.3 17.0
EBITDA 60.8 62.9 -3.4 50.9 19.4
Margin (%) 13.1 14.0 -90bps 12.8 +30bps
Depreciation 8.3 10.0 -17.0 7.3 13.7
EBIT 52.5 52.9 - 43.5 20.7
Interest 9.9 15.3 -35.3 14.4 -31.3
Other Income 2.1 3.4 -38.2 2.6 -19
Exceptional Items (0.2) - - (0.2) -
PBT 44.6 41.0 8.8 31.5 41.6
Tax -62.9 30.2 10.8
Reported PAT 107.4 10.8 896 20.7 419
Adjustment 0.2 - - 0.2 -
Adj PAT 107.6 10.8 896 20.9 419
No. of shares (cr) 18.2 18.2 - 18.2 -
EPS (Rs) 5.9 0.6 896 1.1 436

Change in estimates
Old estimates New estimates Change %
Year / Rs cr FY18E FY18E FY18E
Revenue 1,982 1,878 -5.2%
EBITDA 303 278 -8.3%
Margins (%) 15.3 14.8 -50bps
PAT 203 175 -13%
EPS 11.1 9.6 -13%
 Consolidated Financials

Profit & Loss Account Balance Sheet

Y.E March (Rs cr) FY15A FY16A FY17A FY18E FY19E Y.E March (Rs cr) FY15A FY16A FY17A FY18E FY19E
Sales 1515 1660 1,749 1,878 2,106 Cash 80 64 103 145 195
% change 14.4 9.6 5.4 7.4 12.1 Accounts Receivable 57 94 123 87 98
EBITDA 192 238 257 278 323 Inventories 185 183 208 221 248
% change 21.9 24.3 7.8 8.2 16.4 Other Cur. Assets 421 368 185 494 554
Depreciation 31 30 28 32 34 Investments 1 0 0 0 0
EBIT 159 207 227 244 288 Gross Fixed Assets 490 502 558 563 568
Interest 14 62 56 41 37 Net Fixed Assets 284 278 306 279 250
Other Income 10 14 11 15 17 CWIP 16 6 9 15 15
PBT 125 143 183 219 269 Intangible Assets 790 792 791 790 788
% change 52.1 14.9 28.1 19.3 22.8 Def. Tax (Net) (1) (25) 134 (50 (5)
Tax 4 69 -26 44 54 Other Assets 3 1 2 3 3
Tax Rate (%) 2.8% 27.5% -13.9% 20.0% 20.0% Total Assets 1837 1760 1862 2029 2146
Reported PAT 121 77 209 175 215 Current Liabilities 290 807 661 422 472
Adj* -15 16 -64 0 0 Provisions 150 91 55 62 69
Adj PAT 106 93 145 175 215 Debt Funds 449 7 16 392 342
% change 24.3 -12.0 54.9 20.9 22.8 Other Liabilities 163 7 47 2 2
No. of shares (mn) 18 18 18 18 18 Equity Capital 18 18 18 18 18
Adj EPS (Rs) 5.8 5.1 8.0 9.6 11.8 Reserves & Surplus 762 828 1064 1134 1243
% change 24.3 -12.0 54.9 20.9 22.8 Shareholders Fund 780 846 1082 1152 1261
DPS (Rs) 4.7 4.7 5.8 5.8 5.8 Total Liabilities 1831 1757 1862 2029 2146
CEPS (Rs) 7.7 6.9 9.6 11.4 13.7 BVPS (Rs) 43 47 60 63 69

*adjusted for one off tax reversal

Cash flow Ratios

Y.E March (Rs cr) FY15A FY16A FY17A FY18E FY19E Y.E March FY15A FY16A FY17A FY18E FY19E
Net inc. + Depn. 154 109 175 209 250 Profitab. & Return
Non-cash adj. (10) 29 (116) 165 19 EBITDA margin (%) 12.7 14.4 14.7 14.8 15.4
Changes in W.C 23 3 (52) (520) (39) EBIT margin (%) 10.5 12.5 13.0 13.0 13.7
C.F.O 166 141 7 (147) 231 Net profit mgn.(%) 7.0 5.6 8.3 9.3 10.2
Capital exp. (16) (26) (59) (11) (5) ROE (%) 14.0 11.5 15.0 15.7 17.8
Change in inv. (14) 22 (2) 0 0
ROCE (%) 9.3 12.2 16.3 13.4 15.5
Other invest.CF 4 4 13 15 17
W.C & Liquidity
C.F - investing (26) 0 (48) 4 12
Issue of equity 0 0 0 0 0 Receivables (days) 15.0 16.7 22.6 20.4 16.1
Issue/repay debt 0 0 46 331 (50) Inventory (days) 43.3 40.5 40.8 41.7 40.6
Dividends paid (42) (174) (106) (106) (106) Payables (days) 54.0 120.6 153.2 105.2 77.4
Other finance.CF (14) (11) (38) (41) (37) Current ratio (x) 1.7 0.8 0.9 2.0 2.0
C.F - Financing (18) (302) (97) 185 (193) Quick ratio (x) 0.5 0.2 0.3 0.6 0.6
Chg. in cash 123 (161) (138) 42 50 Turnover &Levg.
Closing cash 218 (81) (74) 145 195 Gross asset T.O (x) 3.1 3.3 3.3 3.4 3.7
Total asset T.O (x) 0.9 0.9 1.0 1.0 1.0
Int. covge. ratio (x) 11.6 3.3 4.0 6.0 7.8
Adj. debt/equity (x) 0.6 0.2 0.4 0.3 0.3
Valuation ratios
EV/Sales (x) 4.8 4.4 3.9 3.8 3.3
EV/EBITDA (x) 38.1 30.4 26.6 25.8 21.8
P/E (x) 63.8 72.5 46.8 38.7 31.5
P/BV (x) 8.7 8.0 6.3 5.9 5.4
 Recommendation Summary (last 3 years) Dates Rating Target
26th May 2014 Reduce 187
400 01st June 2015 Accumulate 314
04th August 2015 Hold 325
23rd October 2015 Accumulate 341
2nd February 2016 Accumulate 328
300 1st November 2016 Reduce 315
24th May 2017 Hold 394

200

100
May 14 May 15 May 16 May 17 *Initiating Coverage

Source: Bloomberg, Geojit Research

Investment Rating Criteria

Large Cap Stocks; Mid Cap and Small Cap;
Buy - Upside is 10% or more. Buy - Upside is 15% or more.
Hold - Upside or downside is less than 10%. Accumulate* - Upside between 10% - 15%.
Reduce - Downside is 10% or more. Hold - Absolute returns between 0% - 10%.
Reduce/Sell - Absolute returns less than 0%.
To satisfy regulatory requirements, we attribute Accumulate as Buy and
Reduce as Sell.
The recommendations are based on 12 month horizon, unless otherwise specified. The investment ratings are on absolute positive/negative return basis. It is
possible that due to volatile price fluctuation in the near to medium term, there could be a temporary mismatch to rating.
* For reasons of valuations/return/lack of clarity/event we may revisit rating at appropriate time. Please note that the stock always carries the risk of being
upgraded to BUY or downgraded to a HOLD, REDUCE or SELL.

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Digitally signed by ANIL R
Date: 2017.05.24 12:35:29 +05'30'

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