Accumulate Jyothy Labs; target of Rs 191: GEPL Capital

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Accumulate Jyothy Labs; target of Rs 191: GEPL Capital

GEPL Capital is bullish on Jyothy Labs and has recommended accumulate rating on the stock with a target of Rs 191 in its January 24, 2012 research report.

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GEPL Capital is bullish on Jyothy Labs and has recommended accumulate rating on the stock with a target of Rs 191 in its January 24, 2012 research report.

"Jyothy Labs, sales grew by 11.5% Y-o-Y and 7.5% Q-o-Q to Rs1.7 bn in Q3FY12. Fabric care (Ujala portfolio) recorded sales growth of 14% Y-o-Y led by 10% Y-o-Y volume growth. Exo reported strong sales growth of 44% (volume growth 36% Y-o-Y) with increase in market share. Maxo, household insecticide brand, was worst hit with 18% Y-o-Y decline in sales. Incremental brand investment and coming peak season is likely to restrict decline in Maxo sales."

"JLL witnessed strong EBITDA margin expansion of 543bps Y-o-Y to 17% as against 5% in Q2FY12. The EBITDA grew by 63% Y-o-Y on 11% Y-o-Y increase in sales. The steep decrease in ad spends by 55% Y-o-Y (630bps) has led to margin expansion. Further average 5% price hikes and savings from distribution change has pushed up the margins. With the increase in brand investments in Maxo, standalone margins are expected to moderate in coming quarter. Henkel India recorded sales of Rs769 mn as against Rs1075 mn in Q2FY12. EBITDA margin for Henkel India declined to 1.6% from 10.6% in Q2FY12. The performance was impacted due to Henkel plant shutdown of 62 days in Karaikal due to labour unrest. Management expects strong growth going forward with brand investments, changes in product positioning & pricing."

"While we remain cautious on the near term financial performance led by higher interest outflow and macro factors, we are positive on the JLL's long term growth potential. we believe acquisition of Henkel India will be value accretive over the longer term. Key things to watch would be sales recovery in Maxo and integration of Henkel India. We have tweaked our estimates to accommodate changes in the quarterly results. We have increased our FY13E consolidated EPS by 1.2% to Rs9.57. We value JLL on PE basis at Rs191 with target multiple of 20x on FY13E EPS of Rs9.57 with ACCUMULATE rating. However any decline in the stock can be a entry point in the stock," says GEPL Capital research report.     

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To read the full report click on the attachment