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Jyothy Laboratories 3QFY2014 performance highlights and results update

January 30, 2014, Thursday, 06:19 GMT | 01:19 EST | 10:49 IST | 13:19 SGT
Contributed by Angel Broking


Jyothy Laboratories (JLL) continues to post strong quarterly numbers. For 3QFY2014, the company reported a top-line in line with our expectation, and operating margin and profit marginally ahead of our expectations. The top-line grew by 26.8% yoy to Rs.297cr, against our estimate of Rs.305cr. The advertisement cost and selling expense for the quarter stood at Rs.27cr (9.2% of net sales), which is 71.6% higher than in the same quarter last year. The operating margin came in at 14.3%, marginally ahead of our estimate of 13.6%, attributable mainly to a lower-than-expected raw material cost. The company reported a profit of Rs.27cr during the quarter, ie a growth of 63.0% yoy, against our estimate of Rs.26cr.
 
Segmental performance: The soaps and detergents segment registered a strong growth of 28.4% yoy to Rs.240cr led by Ujala Fabric Whitener and Margo. Considering the enormous market response to Margo, JLL plans to extend the brand to skin care products. Also, the home care segment continued to show upturn in revenues, registering a growth of 25.9% on a yoy basis to Rs.56cr. Maxo Liquid saw a growth of 26% yoy and the company remains positive on the insecticide liquid category and plans aggressive investment on the brand. Exo continues to do great in the dish-wash segment with 10% market share in value terms; however, Pril Liquid continues to struggle to capture noteworthy market share.
 
Outlook and valuation: Given the successful amalgamation and restructuring along with the various marketing initiatives taken, we remain positive on the company from a longer term perspective. We believe that the company has enormous potential to grow given its lower base and larger reach. At the CMP, the stock is trading at 20.8x FY2015E earnings. We continue to maintain our Accumulate recommendation with a revised target price of Rs.213 based on a higher target PE of 23.0x for FY2015E.