Jyothy Laboratories Ltd. - Update - CD

CD Equisearch Pvt Ltd
4th January, 2011
Jyothy Laboratories Ltd. (JLL) Company Brief

Jyothy Laboratories Ltd. (JLL) is one of the fastest growing diversified
No. of Shares (Crore) 8.06
FMCG
company in the household care segment. It has evolved from a
Face Value (`) 1.00 single
product company in fabric care to multi brand products in
Mkt. Cap (`. Crore) 2206.83 household insecticide, utensil cleaners, personal care, incense sticks and

Price (03/01/2011) 273.80 further forayed into organized laundry services.
Book Value (`.) 82.87
Highlights
P/BV 3.30
⇒ JLL’s plan of becoming an end‐to‐end solutions provider in the
BSE Code 532926
Fabric Care category coupled with significant price increase in fabric
NSE Code JYOTHYLAB whitener Ujala Supreme augurs well for the company.
Bloomberg JYL IN
⇒ Tie up with Mr. Sachin Tendulkar as the brand ambassador to
Reuters JYOI.BO
market its Ujala brand will help it gain abundant visibility and reach
Volume (monthly) (NSE) 392604 the target home‐makers.
52 W H/L (`.) 321.95 / 151.00 ⇒ National roll‐out of Exo dishwash, launching of new product Maxo
Military (household insecticide) and its subsequent national roll out
Shareholding pattern %
will drive growth going ahead.
Promoters 63.12
MFs / Banks / FIs 18.01 ⇒ Jyothy is targeting two regional acquisitions in the fabric care
segment in FY10 for a total consideration of ` 300 crore.
Foreign 11.28
Govt. Holding 0.00 ⇒ It has participated in a bid by Indian Railways to handle their
Non-Promoter Corp. 3.18 laundry requirements on a BOOT model.
Total Public 4.42 ⇒ In the laundry segment, JLL is on track to achieve cash breakeven by
Total 100.00 Mar 11 and recover all investment made in the past 3 years in FY12.
(As on 30th Sept, 10)
⇒ Being positioned in niche household care segment, Jyothy is
Recommendation relatively unaffected by slowdown in economy.
BUY ⇒ In our earlier report dated March 5, 2010 we had recommended a buy
on the stock with a target of ` 249 (Market Price ` 182). We are now
Analyst incorporating estimated FY12 numbers. The stock trades at a P/E
ROHIT AGARWAL multiple of 16.3 x FY12E earnings. We recommend a “BUY” on the
Phone: +91-33-22805601/02 stock with a price target of ` 334, assuming a P/E multiple of 20 x
E-Mail: rohit.agarwal@cdequi.com
FY12E earnings, an upside of 22% from the current levels, over a
period of 12 months. ` in Crores
FY08 FY09* FY10 FY11E FY12E
Net Sales 376.25 361.91 596.32 751.67 947.92
Other Income 7.90 7.61 17.80 20.41 18.42
PBIDT 68.90 56.37 109.61 145.94 189.14
Net Profit 49.88 38.36 74.34 104.73 134.79
Equity Share Capital 7.26 7.26 7.26 8.06 8.06
EPS 6.87 5.28 10.24 12.99 16.72
PE (x) 14.44 8.34 16.39 21.07 16.37
* Accounting year changed from July-June to April-March and accordingly FY09 was for a period of 9 months
Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance

Company Background
Jyothy Laboratories Ltd. (JLL), founded in 1983 by M.P. Ramachandran, is one of the fastest growing
diversified FMCG Company in India. Over the years, JLL has not just diversified its geographies across
various states capturing incremental market share, but also diversified its product portfolio significantly.
It has evolved from a single product proprietary firm, manufacturing and selling a single product, Ujala
Supreme, into a multi brand organisation involved in manufacturing and marketing of products in fabric
care, household insecticide, utensil cleaners, personal care & incense sticks. It has also recently forayed
into fabric care service sector by moving into organized laundry services through its 75% subsidiary
“Jyothy Fabricare Services Limited” (JFSL). It has started its activities initially in Bangalore and
currently has 30 operational outlets.
JLL is well known for its flagship fabric whitener brand Ujala, which enjoys 71.1% market share in the
fabric whitener market and contributes 46% to the total turnover as on FY10. It has increased its presence
in various other household care items such as household insecticide (‘Maxo’) with a market share of
23.2% contributing 30% to the total turnover, Utensil Cleaners (‘Exo’) with a market share of 22.5% in
South India contributing 16% to the total turnover, Fragrances (‘Maya’) & toilet soap (‘Jeeva’) both
contributing 7% to the total turnover on FY10.
JLL manufactures its products through 28 manufacturing facilities in 16 locations across India, some of
which are tax efficient. It has established a wide distribution network across India with 3500 distributors,
1800 field staff with a direct reach of over a million retail outlets and a total reach of over 2.7 million
outlets. It exports its products to 14 countries in Southeast Asia and the Gulf peninsula, including Sri
Lanka, Bangladesh, Mauritius, Malaysia, United Arab Emirates, Hong Kong and Saudi Arabia.
Brand Tree
% of MS – MS- Competitor
Segment
Brand
Turnover Value Volume Brand MS- Growth Drivers - Near Term
Name Name

- FY10 (%) (%) Value (%)

Brand Extension - Washing Powder, Ujala Stiff &
Brand Shine.

Robin Blue
Fabric Care Ujala 46% 71.1% 57.0%
4% 16% price increase in Fabric Whitener.

- All India

Brand endorsement by Sachin Tendulkar

Brand

Mosquito

Mortein Brand Extension - Liquids & Aerosols.

Maxo 30% 23.2% 25.3%

Repellent
32% DEPA Products for outdoor applications

- All India
Brand Exo

Vim Bar Brand Extension - Exo Liquid & Exo Safai.

Dishwash
- South 16% 22.5% 20.1%

62% National rollout in phased manner
India

Brand

Fragrances
- - - -
Maya
7%

Brand

Soaps - - - -
Jeeva
Laundry JFSL, Consolidate - Bangalore operations
1% - - -
Services Fabric Spa Plans to go to other cities
Source: Company, CD Research
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Investment Arguments
Diversified business model
In order to reduce its dependence on flagship fabric whitener brand Ujala, JLL has diversified into other
household care items such as mosquito repellent through brand ‘Maxo’, dishwashing category through
brand ‘Exo’, incense sticks through brand ‘Maya’ & toilet soap through brand ‘Jeeva’. It has also recently
forayed into laundry services business through its subsidiary, Jyothy Fabricare Services Ltd. (JFSL).
Revenue contribution – FY10 The company is looking to move from low margin products to
high margins products. Flagship brand which accounted for 100%
of revenues in FY03 contributed only 46% to total revenues in
FY10. Going forward, JLL is aiming for equal contribution i.e
25% each from its all the 4 major categories Fabric care,
Homecare, Surface Cleaners and Laundry Care Services by
FY15.
Further the company has positioned itself in a niche household
care segment, which is relatively unaffected by slowdown in
economy thus presenting a steady growth outlook for JLL.
Going nation-wide from being south-centric
Jyothy has been looking to take a number of its in‐house brands national. In fabric care, the company has
been extending its detergent powders and stiffener under the Ujala umbrella beyond the four southern
markets of Kerala, Tamil Nadu, Andhra Pradesh and Karnataka. In household insecticides, Jyothy’s
mosquito repellent creams and wet wipes under Maxo will be rolled out nationally, beginning next year.
The firm’s liquid vapouriser and coils are already available in outlets across the country. As for its
dishwashing portfolio under the Exo brand, the company is taking its cake, gel and liquid cleaners to
markets across India in a phased manner throughout this year. This strategy of marketing its products
nationally will help the company to widen its presence and improve both market share and turnover.
Looking to grow inorganically

As a part of growth strategy, JLL is looking to expand inorganically by identifying acquisition
opportunities in India. It intends to target acquisitions which will strengthen its market position in its
key product areas.
As of now, Jyothy is targeting two regional acquisitions in the current financial year for a total
consideration of ` 300 crore. It is currently in talks with a few regional players in the fabric care domain
and precisely, acquisitions in detergents and liquid blue are on the radar. The company was in talks with
Kolkata‐based Safechem Industries, maker of Safed detergent powder having a strong presence in East,
for acquisition of the brand. This, if materialises, will help Jyothy to improve its footprint in the eastern
region.
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3

The acquisitions will be funded through money raised via a qualified institutional placement (QIP) of `
228 cr (` 281.62 per share) done in Aug 10. The balance ` 72 cr will come from internal accruals. We have
factored equity dilution in our estimates.
Ujala maintaining its leadership position & enjoying strong pricing power
Flagship fabric whitener brand Ujala continues to remain an undisputed leader, commanding a market
share of 71.1% by value and 57.0% by volume as on Sep 2010.
Ujala Supreme Price Trend Leveraging on its strong brand presence and extensive
distribution network, JLL is aiming to become an end‐to‐end
14
15 30% solutions provider in the Fabric Care category. While it has
12
10 10 already extended its Ujala brand to washing powder and
10 16.7% 20%
20.0% starch with the launch of Ujala Stiff and Shine, various brand
5 10% extensions such as stain removers, softeners, conditioners
0.0% and liquid detergents are planned to be launched slowly.
0.0%
0 0%
JLL has tied up with Sachin Tendulkar as the brand
CY07 CY08 CY09 CY10
ambassador to market its Ujala brand for 30 months. The
Price % Increase
company believes that it will help it gain abundant
Ujala Brand Performance visibility and reach the target home‐makers.
The company also enjoys strong pricing power which is
evident from the 4% volume growth witnessed in Q2 after
it hiked the price of fabric whitener by 16% from ` 12 to `
14 in the first quarter of current financial year.
We expect Ujala to continue its growth momentum and
provide the platform for launching newer products in
the future. Revenue from this segment is expected to
grow at a CAGR 23% from ` 276 cr in FY10 to ` 418 cr in
Source: Company, CD Research FY12.
Maxo – Focusing on improving margins

Maxo has grown at rapid pace to become the second largest player in the coil segment with a market
share of 23.2%. This has been possible mainly due to its focus on rural markets where it is the largest
player with a market share of 33% as on Sep 10.
In order to achieve long term profitability, JLL has pulled back aggressive promotions on this
product. It has reduced the 30% trade discounts it was giving on Maxo coils to 20% in 1QFY11.
Margins are expected to improve from this action.
Moreover, Jyothy is now moving from low‐margin products like Coils to higher margin products like
Liquids and Aerosols. JLL plans to increase its revenue share from liquid vaporizers and aerosol
sprays from 20% currently to 50% of the overall category by FY15.
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4

Maxo Brand Performance Going forward, the company wants to continue with the coils
where no electricity is required, to cater to the masses in the rural
areas and extend it to liquid vaporizers and sprays for urban
masses, where the margins are higher.
With more focus on increasing penetration in the liquid
segment, we expect this segment to grow at a steady pace
going forward. Revenue from this segment is expected to
grow at a CAGR 21% from ` 182 cr in FY10 to ` 266 cr in
FY12.
Maxo DEPA products to go national early next year
In order to strengthen its mosquito repellent brand Maxo, JLL has bought the Diethyl Phenylacetamide
(DEPA) technology (a repellent formulation for all blood sucking insects and mosquitoes) from Defence
Research & Development Organisation, Ministry of Defence, to manufacture and market repellants for
outdoor applications. The company has secured exclusive rights for both domestic and international
operations. JLL will share 2% of domestic sales and 4% of exports with GoI.
This will be a big growth driver for the company going forward as all of its current products in the
mosquito repellent segment are for indoor use and this brand extension is for outdoor use. The product
has been launched under the brand name of Maxo Safe & Soft and Maxo Military in South and will go
national by early next year. The management estimates the market opportunity for this product to be
around ` 150 – 200 crore in two years and expects sales of a round ` 30 crore this year and around ` 60
crore in FY12.
EXO – Fastest growing segment

Exo continued to be the second largest player in South India with a market share of 22.5% by value in
Southern India for Sept 2010.
After having extended the Exo brand in dishwashing liquid and scrubber, JLL is scaling up the product
by going nation‐wide from being south‐centric albeit in a phased manner. It is currently being launched
in regions where Jyothy has more than 80% market share like Delhi and Punjab, Kerala & West Bengal.
Exo Brand Performance EXO is currently available at around 8 lac retail outlets and JLL
is looking to extend that to around 1.5 mn outlets by the end of
this financial year.
Exo has been growing faster than the other major segments
and its contribution to the total revenues has been
increasing consistently. It is expected to achieve a CAGR of
32% in next two years due to national rollout and its
contribution to the total revenues is expected to increase
from 15.9% in FY10 to 17.4% in FY12.
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Ramp up of laundry and fabric care services

After having entered into laundry services business, through its 75% subsidiary Jyothy Fabricare Services
Ltd. (JFSL), at a cost of ` 35 crore, JLL is on track to achieve cash breakeven by Mar, 2011.The
management believes that it will recoup all the investments made in the past 3 years in FY12.
JFSL won two government contracts. It became the official laundry service provider for Common Wealth
games 2010 and also bagged contract to wash linen for 12 trains originating from Bangalore. For
Common Wealth Games, JLL was expecting a minimum business of ` 2 crore from it, but ended up
receiving only ` 15 lakh due to irregularities at the CWG.
The company also participated in a bid by Indian Railways to handle their laundry requirements on a
BOOT (Build‐ Own‐Operate‐Transfer) model. It could be a big boost to the top‐line if JLL wins the
contract as Indian Railways spend around ` 1500 cr per annum on such services.
JSFL has 30 operational stores in Bangalore. It is looking at consolidating its operations in Bangalore and
then expand to other cities through a combination of franchisee and ‘owned’ model. It plans to open its
outlet in Chennai, Hyderabad and Pune in 2011‐12. Each city revenue target is ` 30‐40 cr.
As of now, about 30,000 pieces were washed on a daily basis. The company has a current capacity of
40000 per day and JLL wants to increase it to 50000 per day by March 2011, running the unit in 3 shifts
per day.
We remain very bullish on this segment. The organised laundry service industry in the country is valued
at about ` 5,200 crore with Bangalore accounting for about ` 100 crore of the market. A mix of changing
demographics and economic factors form a strong case for an organised player in the laundry services.
The company is targeting revenue of ` 25 cr in FY11 & ` 35 cr in FY12. Currently laundry business is
having margin of 48% and expects it to grow to 70% in coming years. JFSL targets to open 500 Fabric
Spa outlets across India and generate a turnover of ` 500 crore with PAT of ` 100 crore in FY15.
Well-known brand identity

The company has well established brand identity among Indian households and enjoys considerable
market share in each of the product segment. Starting with a fabric whitener brand, Jyothy Laboratories
has expanded its portfolio of FMCG products to household insecticides, utensil cleaners, personal care
and home care segments.
The company is well known for its flagship fabric whitener brand Ujala, which enjoys 71.1% market
share in the liquid whitener market. Household insecticides brand Maxo is the second largest player in
the coil market with 23.2% market share. Exo dish cleaner, available only in the southern market is the
second largest player, commanding 22.5% share in the region.
As company’s business is primarily driven by consumer spending, such strong brand presence
provides a strong platform to grow its income and extend its market share.
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6

Wide distribution network

JLL has the third largest distribution network in India with a retail reach of 2.7 mn outlets next only to
giants like Colgate Palmolive (3mn) and Lifebuoy (Company: HUL, 2.9mn) as of March 31, 2010. The
company has around 1400 field staff that has a direct reach of 1 mn retail outlets with strong presence
both in urban and rural areas, enabling JLL to benefit from opportunities in both markets.
Moreover, such well established distribution network helps the company in sustaining growth
through successive brand extensions, capturing market share and launching new products in a shorter
time. In the past JLL launched Maxo, and by taking advantage of its huge distribution network and it
achieved the same level of sales in 4 yrs time, which took 14 yrs to establish for Ujala Supreme. The
company is looking at nationwide rollout of Ujala Techno Bright, Maxo – DRDO and EXO.
On a steady growth path

In the first half of current financial year, Jyothy recorded a standalone revenue growth of 19% led by 23%
growth in Soaps & Detergents business, which includes fabric whitener, fabric detergent, surface
cleaning products and soaps. Margins declined by 160 basis points to 19.1% on the back of 94% increase
in advertising expenses, mainly incurred on a TV campaign with Sachin Tendulkar for the endorsement
of Ujala Techno Bright detergent. Net profit increased by 14% during the same period.
Going ahead, over FY2010‐12E we estimate
consolidated revenues to clock compounded
annual growth of 26% due to 16% price increase
of Ujala Supreme, national roll‐out of Exo
dishwash, launching of new product Maxo
Military and its subsequent national roll out and
enormous growth in laundry services business.
We expect the revenue contribution from Ujala
and Maxo to decline from 46.2% and 30.4% in
Product wise sales mix FY10 to 43.9% and 28.0% in FY12 respectively.
Similarly contribution from Exo and Laundry
services to total consolidated revenues are
expected to increase from 15.8% and 0.7% in FY10
to 17.4% and 3.7% in FY12 respectively. Jeeva &
Maya brands are expected to maintain their
revenue contribution around 7%. The company is
aiming for equal contribution i.e 25% each from
its all the 4 major categories Fabric care,
Homecare, Surface Cleaners and Laundry Care
Services by FY15.
7
7

EBIDTA Margin is expected to stablise around
19.7% levels. We believe that last quarter was an
aberration in terms of advertising expenses as JLL
expended a onetime ` 11.6 crores on the launch of
Ujala Techno Bright washing powder. A&P
expenditure would return to normal levels from
here on.
Net profit is expected to grow at a CAGR of 52%
in the same period.
Peer Comparison

Debt
EBITDM PATM M.Cap/ EV /
Company Name CMP Equity FV PE P/BV Equity
(%) (%) Sales EBITDA
Ratio
Dabur India 100.7 174.1 1 32.5 18.2 0.2 19.4 14.7 4.8 24.0

GlaxoSmith C H L 2299.6 42.1 10 34.5 8.4 0.0 19.9 11.5 2.7 11.5
Godrej Consumer 386.8 32.4 1 31.9 7.8 0.2 21.8 16.3 6.2 24.9
Hind. Unilever 313.1 221.3 1 33.2 18.8 0.1 16.5 12.1 2.9 16.9
Jyothy Lab. 273.8 8.1 1 25.9 3.3 0.0 17.9 12.8 2.0 9.9

Marico 121.4 61.4 1 30.0 10.7 0.7 16.6 11.6 3.3 20.8
Nestle India 3829.2 96.4 10 50.7 30.9 0.0 19.7 12.5 4.7 23.7
P & G Hygiene 1847.3 32.5 10 37.6 10.6 0.0 28.3 19.6 7.1 24.3
Source: Capitaline, CD Research
Half yearly performance

Half Yearly Results In `. Crores
H1FY11 H1FY10 % Chg.
Net Sales 295.16 248.67 18.70
Other Income 9.27 6.52 42.18
Total Income 304.43 255.19 19.30
Total Expenditure 248.12 203.63 21.85
PBIDT 56.31 51.56 9.21
Interest 0.09 0.12 (25.00)
PBDT 56.22 51.44 9.29
Depreciation 5.73 4.68 22.44
PBT 50.49 46.76 7.98
Tax 9.33 10.67 (12.56)
Net Profit 41.16 36.09 14.05
Equity 8.06 7.26 11.02
EPS (FV ` 1) 5.11 4.97 2.73
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Consolidated Financials
Profit & Loss In `. Crores
Year ended 31st March FY08 FY09* FY10 FY11E FY12E
Net Sales 376.25 361.91 596.32 751.67 947.92
Other Income 7.90 7.61 17.80 20.41 18.42
Total Income 384.15 369.52 614.12 772.08 966.34
Total Expenditure 315.24 313.15 504.51 626.14 777.20
PBIDT 68.90 56.37 109.61 145.94 189.14
Interest 0.69 0.71 1.70 1.56 1.47
PBDT 68.21 55.66 107.91 144.38 187.67
Depreciation 7.98 7.48 12.37 12.69 13.69
Tax 16.68 10.81 21.47 27.26 39.49
Reported PAT 43.55 37.37 74.07 104.43 134.49
Minority Interest & Extra-ordinary Items (6.33) (0.99) (0.27) (0.30) (0.30)
Net Profit 49.88 38.36 74.34 104.73 134.79
EPS (`.) 6.87 5.28 10.24 12.99 16.72
Balance Sheet In `. Crores

SOURCES OF FUNDS
Equity Share Capital 7.26 7.26 7.26 8.06 8.06
Reserves 318.23 339.61 380.50 674.36 761.79
Total Shareholders Funds 325.49 346.87 387.76 682.42 769.85
Total Debt 0.52 0.52 13.05 13.00 13.00
Total Liabilities 326.01 347.65 401.31 695.42 782.85
APPLICATION OF FUNDS
Net Block 194.95 200.37 233.61 245.05 256.37
Capital Work in Progress 9.38 11.04 4.13 5.00 5.00
Investments 0.52 0.23 0.01 227.95 227.95
Current Assets, Loans & Advances
Inventories 47.86 47.03 73.04 90.20 113.75
Sundry Debtors 25.40 42.90 70.73 88.85 111.66
Cash and Bank 96.00 101.93 122.72 160.12 214.47
Loans and Advances 19.11 22.12 35.12 41.34 48.34
Total Current Assets 188.37 213.98 301.61 380.51 488.23
Less: Current Liabilities and Provisions
Current Liabilities 36.80 42.23 78.61 96.21 115.65
Provisions 22.16 25.33 46.16 51.88 64.04
Total Current Liabilities 58.96 67.56 124.77 148.09 179.69
Net Current Assets 129.41 146.42 176.84 232.42 308.54
Miscellaneous Expenses not written off 0.07 0.07 0.00 0.00 0.00
Net Deferred Tax (8.32) (10.48) (13.28) (15.00) (15.00)
Total Assets 326.01 347.65 401.31 695.42 782.85
9
9
Key Financial Ratios

Growth Ratios
Revenue (%) 4.68 (3.81) 64.77 26.05 26.11
PBIDT (%) 9.66 (18.19) 94.45 35.71 29.60
Net Profit (%) (3.00) (23.09) 93.80 40.88 28.70
EPS (%) (3.00) (23.09) 93.80 26.90 28.70
Margins
PBIDTA Margin (%) 18.31 15.58 18.38 19.42 19.95
Net Profit Margin (%) 13.26 10.60 12.47 13.93 14.22
Return
ROCE (%) 18.69 14.06 24.23 19.16 22.41
RONW (%) 15.32 11.06 19.17 15.30 17.47
Valuations
Market Cap / Sales 1.78 1.09 1.97 2.94 2.33
EV/PBIDTA 8.11 5.52 9.92 14.11 10.60
P/E 14.44 8.34 16.39 21.07 16.37
P / BV 2.19 1.19 3.09 4.12 3.29
Other Ratios
Debt-Equity Ratio 0.00 0.00 0.03 0.02 0.02
Current Ratio 3.19 3.17 2.42 2.57 2.72
Interest Cover Ratio 88.29 68.86 57.20 85.42 119.44
Turnover Ratios
Fixed asset turnover 1.93 1.81 2.55 3.07 3.70
Total asset turnover 1.15 1.04 1.49 1.08 1.21
Debtors turnover 14.81 8.44 8.43 8.46 8.49
Inventory turnover 7.86 7.70 8.16 8.33 8.33
* During FY09, Jyothy has changed its accounting year from July-June to April-March and accordingly FY09 was
for a period of nine months ended March 31, 2009.
Risk & Concerns

« Low‐entry barriers and attractive returns can attract new industry entrants and increase competition.
« Almost 60% of JLL’s turnover comes from rural India. Rising price levels and deficient monsoon
might impact the rural growth, thus hurting the revenue of company.
« Growing penetration of emerging retail formats such as supermarket and hypermarket chains in
India may adversely impact its margins.
« Sales of Maxo products are seasonal and during periods of lower sales activity, JLL’s revenues may
be delayed or reduced and may adversely impact its results of operations.
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Valuation & Recommendation

India is on the threshold of a structural uplift in consumer demand. Rising income level, favourable
demographics, changing lifestyle and growing rural prosperity will drive the growth of fast moving
consumer goods (FMCG) sector going forward. As per FICCI‐Technopak report Indiaʹs FMCG sector
is estimated to clock USD 43 billion by 2013 and USD 74 billion by 2016 from USD 25 billion in FY08.
Jyothy Laboratories being one of the fastest growing company in the household care segment will be one
of the prime beneficiaries of this growth. The company is well positioned to sustain its market share and
is also looking at strengthening its position in the market by exploring significant growth opportunities
that exist in the expanding household goods sector, in both urban and rural India.
JLL’s plans of becoming an end‐to‐end solutions provider in the Fabric Care category coupled with
significant price increase in fabric whitener Ujala Supreme augurs well for the company. Further national
roll‐out of Exo dishwash, launching of new product namely Maxo Military and its subsequent national
roll out will drive the growth going ahead. Moreover entry in laundry service business will lead to
improvement in margins and return ratios as the business acquires scale.
JLL has a strong balance sheet with zero debt, strong margins and healthy return ratios. Going ahead,
we expect revenues to grow at CAGR of 26% and profit to grow at 52% over FY10‐ FY12E.
JLL has strong presence across all its product segments mainly due to its vast distribution network. Even
though JLL is of smaller size when compared with larger peers, it has been more aggressive in cornering
the market share. The company has also been consistently showing impressive performance both in
terms of topline growth and margins improvement. Relatively speaking too, while the peer group is
trading at an average P/E multiple of 34x, Jyothy is available at P/E multiple of 25.9x
Given the healthy sector outlook, strong balance sheet, aggressive plans and earnings growth visibility
over the next two years, this stock seems to be a good buy.
In our earlier report dated March 5, 2010 we had recommended a buy on the stock with a target
of ` 249 (Market Price ` 182). We are now incorporating estimated FY12 numbers. At the current
price of ` 274, the stock trades at a P/E multiple of 21.1 x FY11E earnings and 16.4 x FY12E
earnings. With this backdrop we believe this to be an excellent opportunity for investors, we
recommend a “BUY” on the stock with a price target of ` 334, assuming a P/E multiple of 20 x
FY12E earnings, an upside of 22% from the current levels, over a period of 12 months.
Disclaimer
CD Equi Search Pvt. Ltd. as a firm may have investment positions in the company shares discussed above. This document is meant for our clients only and is not for public
distribution. This material is for the personal information of the authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to
sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The material is based upon information that we consider
reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. Neither CD Equi Search Pvt. Ltd., nor any person connected with it, accepts
any liability arising from the use of this document. The recipient of this material should rely on their own investigations and take their own professional advice. Opinions expressed
are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and
may be subject to change without notice. If you have any questions about this report please get in touch with CD Equi search Pvt. Ltd.
CD Equisearch Pvt. Ltd. 10, Vaswani Mansion, 2nd Floor, Dinshaw Waccha Road, Mumbai – 400 020 Phone +91 (22) 2283 0652 / 0653, Fax +91 (22) 2283 2276,
Email: research@cdequi.com Website: www.cdequi.com
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Jyothy Laboratories Ltd. - Update - CD

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CD Equisearch Pvt Ltd

4th January, 2011

Jyothy Laboratories Ltd. (JLL) Company Brief

Equities Derivatives Commodities Distribution of Mutual Funds Distribution of Life Insurance

 Brand endorsement by Sachin Tendulkar

Mortein  Brand Extension - Liquids & Aerosols.

32%  DEPA Products for outdoor applications

Vim Bar  Brand Extension - Exo Liquid & Exo Safai.

- South 16% 22.5% 20.1%

Looking to grow inorganically

Maxo – Focusing on improving margins

EXO – Fastest growing segment

Ramp up of laundry and fabric care services

Well-known brand identity

Wide distribution network

On a steady growth path

Half yearly performance

Balance Sheet In `. Crores

Key Financial Ratios

Risk & Concerns

Valuation & Recommendation

Email: research@cdequi.com Website: www.cdequi.com

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Brand endorsement by Sachin Tendulkar

Mortein Brand Extension - Liquids & Aerosols.

32% DEPA Products for outdoor applications

Vim Bar Brand Extension - Exo Liquid & Exo Safai.