'Jyothy Labs – Results Update' - Buy on dips - Way2Wealth

Results in line with expectations: Jyothy Labs (JLL) has reported results in line with expectations. Consolidated net sales for the full year 2010 have grown by 64.8% to Rs 596.3 crores. Figures for FY09 represents 9 months data as the Company changed its accounting year from June to March. Operating profit margins have expanded by 280 bps yoy to 16.5% due to 400 bps dip in raw material expenses as a % of sales. JLL stepped up its ad spend by 130 bps to 6.4% as a result of national launch of Exo. PAT for the year grew by 94% to Rs 74.1 crores. On a like to like basis, PAT grew by 45%.

For FY11, we expect Exo dish wash and Maxo liquid to be the growth drivers as these products gain scale due to its national launch. Also, its mosquito repellent for outdoor use shall add to the growth prospects of home care segment. We introduce out FY13 estimates and maintain our positive view on the stock. At the CMP of Rs 185, the stock quotes at a PE of 11.7x and 10x its FY12E and FY13E EPS of Rs 15.8 and 18.5 respectively. We recommend investors to Hold the stock and add on to their existing positions on declines.

Result Highlights

• A consolidated net sales for FY10 has grown by 64.8% to Rs 596.3 crores. Figures for FY09 represents 9 months data as the Company changed its accounting year from June to March. For Q4FY10, the company reported 26% rise in net profit to Rs 27.1 crores compared to Rs 21.5 crores in the corresponding period previous year. Revenues rose by 31 % to Rs 190 crores as compared to Rs 145 crores. The growth was mainly volume led as the Company had not undertaken any price increases.
• The Soaps & Detergents business, which includes fabric whitener & detergent, surface cleaning products and soaps, witnessed increase if 70.8% in revenue to Rs 340 crores during FY10 as compared to Rs 199 crores in FY09. Segment profit surged to Rs 93.6 crores as against Rs 51.5 crores in FY09, an increase of 82%.
• Home Care segment including mosquito coils, dish wash scrubber and incense sticks saw 56.5% increase in revenues to Rs 241 crores as against Rs 154 crores during the same period last year. This is mainly due to national launch of Exo and Maxo. Segment profit posted an increase of 285% at Rs 13.6 crores as compared to Rs 3.5 crores in FY09.
• Market share improvement across categories: JLL witnessed market share improvement across categories with Exo seeing maximum market share gain both in value and volume terms.
• Margins improve: Operating margins improved by 280 bps yoy to 16.5% due to 400 bps dip in raw material expenses as a % of sales. JLL stepped up its ad spend by 130 bps to 6.4% as a result of national launch of Exo. PAT for the year grew by 94% to Rs 74.1 crores. On a like to like basis, PAT grew by 45%.
• Jyothy Fabricare Services Ltd (JFSL) washed 22,000 pieces a day during the quarter as against 20,000 pieces in Q3FY10. The total number of stores operational as on March 2010 stood at 34. The realisation per piece has seen a decline on a qoq basis. Realisation for Snoways has come down from Rs 38/piece to Rs 35/piece. For Fabric Spa, the realisation per piece has come down to Rs 70 from Rs 109 in Q3FY10 and for Institutional, it has declined from Rs 29/kg. to Rs 27/kg.

Source : Equity Bulls

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